🕷️ Crawler Inspector

URL Lookup

Direct Parameter Lookup

Raw Queries and Responses

1. Shard Calculation

Query:

Response:

Calculated Shard: 57 (from laksa054)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa057.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical, ml_categories_json AS ml_categories_json, ml_types_json AS ml_types_json, ml_intent_types_json AS ml_intent_types_json, meta_language AS meta_language, attrs_author AS attrs_author, ifNull(toUnixTimestamp(attrs_publish_time), 0) AS attrs_publish_time, ifNull(toUnixTimestamp(attrs_original_publish_time), 0) AS attrs_original_publish_time, ifNull(attrs_is_republished, 0) AS attrs_is_republished, ifNull(attrs_nr_words, 0) AS attrs_nr_words, ifNull(attrs_boilerpipe_nr_words, 0) AS attrs_boilerpipe_nr_words, ifNull(body_ext_links_number, 0) AS body_ext_links_number, ifNull(body_int_links_number, 0) AS body_int_links_number, ifNull(meta_nofollow, 0) AS meta_nofollow, ifNull(meta_noarchive, 0) AS meta_noarchive, ifNull(props_was_rendered, 0) AS props_was_rendered, ifNull(src_redirect, \'\') AS src_redirect, ifNull(download_time_msec, 0) AS download_time_msec, ifNull(download_ttfb_msec, 0) AS download_ttfb_msec, ifNull(download_size, 0) AS download_size FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://seekingalpha.com/article/4435888-what-is-an-etf\')), getAhrefsUnparsedNoserviceFromURL(\'https://seekingalpha.com/article/4435888-what-is-an-etf\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/seekingalpha.com\/article\/4435888-what-is-an-etf","crawl_time":1775652203,"first_indexed_time":1624304352,"http_code":200,"src_unparsed":"com,seekingalpha!\/article\/4435888-what-is-an-etf s443","src_root_hash":"11478393694123815657","history_drop_reason":null,"meta_title":"Exchange Traded Fund (ETF): What It Is & How It Works | Seeking Alpha","meta_descriptions":["An ETF, or an Exchange Traded Fund, is a fund that tracks a specific asset or type of asset. Learn more about what they are, the different types, and how to invest in them."],"attrs_boilerpipe_text":"Education\nETF\nTable of Contents\nExchange-traded funds, or ETFs, are versatile investment securities offering a wide range of benefits for investors. Whether you want to passively track a broad market index or invest in a niche area of the market, ETFs provide a low-cost, simple means of accessing a basket of securities in one fund.\nz1b\/iStock via Getty Images\nAn ETF, or exchange-traded fund, is an investment security that combines some of the attributes of stocks and\nmutual funds\n. Like stocks, ETFs trade intra-day on an exchange. Like with mutual funds, many ETFs seek to track the performance of a benchmark index, such as the\nS&P 500\n.\nHow Do ETFs Work?\nWhen you buy an ETF, you're buying a basket of securities wrapped into one investment that trades on an exchange. Most ETFs passively track an underlying index, which is a representation of other securities or asset types, such as stocks, bonds, commodities, or currencies.\nShareholders of ETFs do not directly own shares of the underlying securities or\nassets\n; they own shares of the ETF itself. Also, while ETFs do trade on an exchange like stocks, the process of creating and redeeming shares is unique in the investment world.\nHere are the steps taken to create a typical ETF before investors can buy shares:\nAn investment company or ETF manager, known as a sponsor, decides to create a new ETF.\nThe ETF sponsor forms an arrangement with a third party, known as an authorized participant, or AP, which is typically a large financial institution.\nThe AP purchases securities in the ETF's benchmark index, then exchanges them for a block of ETF shares of equal value, called \"creation units.\"\nThe AP sells shares of the ETF to investors or market makers on an exchange.\nInvestors can then buy and sell shares of the ETF, which is assigned a unique ticker symbol, on an exchange, much like a stock.\nPros and Cons of ETFs\nETFs have multiple advantages but they're not an ideal fit for every investor. As with any other type of security, investors are wise to weigh the pros and cons of ETFs and determine if these funds are appropriate for their unique investment goals and strategies.\nPros of ETFs\nDiversification\n:\nETFs provide exposure to dozens, or even hundreds, of securities in just one basket. Exposure to multiple securities in a portfolio can reduce risk.\nSpecialization:\nCertain specialty ETFs enable access to niche areas of the market that may otherwise be inaccessible to most investors.\nLow cost:\nBecause ETFs are\npassively managed\n, the operational costs are extremely low compared to actively managed portfolios. It's common for an ETF expense ratio to be lower than 0.10%, which is just $10 annually for every $10,000 of investments.\nTax-efficiency\n:\nFor the ETFs that track a benchmark index, there is very little turnover (buying and selling within the portfolio), which minimizes management costs and taxable distributions to shareholders.\nMarket orders\n:\nOne of the stock-like aspects that can be a benefit for investors is the ability to place market orders, such as a stop-loss order or a limit order. This feature enables an investor to automate execution of trades at the best price possible.\nCons of ETFs\nTrading costs:\nMany ETFs can be traded at zero commission and with no transaction fee. However, some brokers will charge commissions to trade certain ETFs on their platform. These commissions can negate the savings of the low expense ratios of ETFs and can really add up over time if an investor trades frequently.\nIlliquidity:\nETFs that have low\ntrading volumes\ncan have wide bid-ask spreads, similar to many stocks with low trading volumes. The\nbid-ask spread\nis the amount by which the ask price exceeds the bid price. This spread can add to the cost of trading, which erodes the investor's return.\nSettlement:\nAs is the case with stocks, ETF settlement is T+2, which means you'll wait two days after the trade before it settles to cash. Mutual fund settlement is commonly T+1.\nTip:\nTo reduce trading costs and minimize liquidity issues, investors can look for ETFs with a multi-year track record and assets higher than $1 billion. Generally speaking, the more established the ETF and the larger the assets, the greater the trading volume will be and the better odds it will trade free of commission and have narrower bid-ask spreads on the price.\nTypes of ETFs\nThere are many different types of ETFs but they can be broken down into six broad categories: equity, fixed-income, commodity, currency, real estate, and specialty ETFs.\n1. Equity ETFs\nThere are dozens of sub-categories within the equity ETF universe. Some of the more common equity ETF types include:\nS&P 500 ETFs\nDividend ETFs\nInternational ETFs\nEquity ETFs can be further categorized by objective, such as growth and value, and by market capitalization, including micro-, small-, mid-, large-, and mega-cap ETFs.\n2. Fixed-Income ETFs\nAlso known as\nbond ETFs\n, these funds track bond market indices, such as the Bloomberg Barclays US Aggregate Bond Index.\nOther common\nfixed-income\nETF categories include:\nGovernment bond\nCorporate bond\nTax-free municipal bond\nInternational bond\nEmerging markets bond\nHigh-yield bond\n3. Commodity ETFs\nRather than hold the physical asset, which can be inaccessible or impractical for an investor,\ncommodity ETFs\ntrack the price of a commodity, such as\ngold\n, grains or\noil\n, or a basket of commodities, such as precious metals or agricultural ETFs.\nSome examples of\ntop-performing commodity ETFs\ninclude:\nGold ETFs\nSilver ETFs\nOil ETFs\nNatural Gas ETFs\nCopper ETFs\nUranium ETFs\n4. Currency ETFs\nAs is the case with commodities,\ncurrency ETFs\nprovide exposure to currency markets and\nforeign exchange trading (Forex)\nthat may otherwise be inaccessible to the everyday investor. Currency ETFs may hold cash deposits in the currency being tracked or use\nfutures contracts\non the underlying currency.\n5. Real Estate ETFs\nThese ETFs typically track an index of publicly traded real estate investment trusts, or REITs, which are companies that own, operate or finance income-generating real estate. Investors that buy\nreal estate or REIT ETFs\nare often seeking high-yielding investments.\n6. Specialty ETFs\nOne of the advantages of ETFs is specialization in\nsectors\nand other niche areas of the market. For example,\nspecialty ETFs\nmay invest in a sector of the economy, such as technology, or a more narrow sub-sector of technology, such as\nSemiconductor ETFs\nor Artificial Intelligence ETFs. Other sectors include healthcare, industrials, consumer staples, consumer discretionary, financial services, and utilities.\nETFs vs. Mutual Funds\nETFs and mutual funds share some common features and benefits but there are also some noteworthy differences for investors to know. For example,\nETFs and mutual funds\nare both baskets of securities packaged as a single fund but ETFs trade intra-day, whereas mutual funds settle at the close of the market.\nSimilarities\nDiversification:\nBoth fund types invest in a basket of securities, which makes them less risky than individual stocks and bonds.\nVariety of choice:\nETFs and mutual funds both cover a wide variety of asset types and security types for investors to choose from.\nProfessional management:\nAlthough\nETFs and index mutual funds\nare passively managed, both types of funds are overseen by a professional manager or management company.\nDifferences\nTrading:\nETFs are priced and traded intra-day, like stocks, whereas mutual funds settle at the close of trading at the fund's net asset value, or NAV.\nBid-Ask Spread:\nSince ETFs trade like stocks, there can be a range, or spread, between the ask price and the bid price. This spread can add to the cost of trading. Mutual funds don't have a bid-ask spread.\nInitial Investment Amount:\nETFs can be purchased at the cost of one share. This is typically much lower than the minimum initial investment requirement of a mutual fund, which typically ranges between $1,000 and $3,000.\nTip: ETFs are not guaranteed investments. Although ETFs are generally less volatile than individual stocks, investors can reduce risk further by investing in a variety of ETFs from diverse categories, such as different types of equity ETFs, fixed-income ETFs, and commodity ETFs.\nHow to Invest in ETFs\nOne of the attractive qualities of\ninvesting in ETFs\nis that buying and selling shares is relatively easy. Because ETFs have been around for nearly 30 years, and they've risen dramatically in popularity since their inception, ETFs are standard products offered at most brokerage companies. The relative liquidity has given rise to a vibrant community of both ETF\ntraders and investors\n.\nHere's how to buy an ETF:\nChoose a brokerage firm\n, such as a discount online broker like Charles Schwab, TD Ameritrade, or E*Trade, or a fund company like Vanguard or Fidelity, or an investment app like Robinhood.\nChoose an account type\n, such as a joint or\nindividual brokerage account\n, or a retirement account, like an IRA.\nOpen your account\n, which can take a matter of minutes online.\nAdd money to your settlement account\n, or core account, which is typically a money market account that receives and holds cash while it awaits trading in your brokerage account.\nChoose your ETF\n, which can be done with the aid of an\nETF screener\n.\nBuy shares of the ETF,\nwhich is identified with a ticker symbol, by placing \"buy\" trade, selecting the number of shares to purchase, and submitting the trade during regular\nmarket hours\n, Monday through Friday, 9:30am EST to 4:00pm EST. This is largely the same as the\nprocess for buys company stocks\n.\n1.29K Followers\nAnalyst’s Disclosure:\nI\/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.\nI wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.\nSeeking Alpha's Disclosure:\nPast performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.\nRecommended For You\nLearn More On ETF","attrs_markdown":"[Skip to content](https:\/\/seekingalpha.com\/article\/4435888-what-is-an-etf#content)\n\n[Home page Seeking Alpha - Power to Investors](https:\/\/seekingalpha.com\/#source=source%3Asite_navigation)\n\n- Create Free Account\n- [About Premium](https:\/\/seekingalpha.com\/subscriptions\/premium#source=why_premium%3Aexpanded%3Anavbar_left)\n- [Explore Alpha Picks](https:\/\/seekingalpha.com\/#source=explore_alpha_picks%3Aexpanded%3Anavbar_left)\n- [NEW Summary report](https:\/\/seekingalpha.com\/subscriptions\/premium-virtual-analyst-report#source=virtual_analyst_report%3Aexpanded%3Anavbar_left)\n- [FREE Newsletters](https:\/\/seekingalpha.com\/free-investing-newsletters#source=free_newsletters%3Aexpanded%3Anavbar_left)\n\n- [Home](https:\/\/seekingalpha.com\/#source=home%3Aexpanded%3Anavbar_left)\n- [Stock Analysis](https:\/\/seekingalpha.com\/latest-articles#source=analysis%3Aexpanded%3Anavbar_left)\n  \n  ## Stock Analysis\n  - 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[Notable Calls](https:\/\/seekingalpha.com\/market-news\/notable-calls#source=notable_calls%3Aexpanded%3Anavbar_left)\n  - [On The Move](https:\/\/seekingalpha.com\/market-news\/on-the-move#source=on-the-move%3Aexpanded%3Anavbar_left)\n  - [Energy Stock News](https:\/\/seekingalpha.com\/market-news\/energy#source=energy_stock_news%3Aexpanded%3Anavbar_left)\n  - [Tech Stock News](https:\/\/seekingalpha.com\/market-news\/technology#source=tech_stock_news%3Aexpanded%3Anavbar_left)\n  - [IPO News](https:\/\/seekingalpha.com\/market-news\/ipos#source=ipo_news%3Aexpanded%3Anavbar_left)\n  - [Artificial Intelligence (AI) News](https:\/\/seekingalpha.com\/market-news\/ai-tech-stocks#source=ai-tech-stocks%3Aexpanded%3Anavbar_left)\n  - [Budget & DOGE News](https:\/\/seekingalpha.com\/market-news\/budget-regulation#source=budget-regulation%3Aexpanded%3Anavbar_left)\n  - [Merger & Acquisition News](https:\/\/seekingalpha.com\/market-news\/m-a#source=merger_acquisition_news%3Aexpanded%3Anavbar_left)\n- [Market Data](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/key_markets#source=market_performance%3Aexpanded%3Anavbar_left)\n  \n  ## Market Data\n  - [Key Market Data](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/key_markets#source=key_markets%3Aexpanded%3Anavbar_left)\n  - [Earnings Calendar](https:\/\/seekingalpha.com\/earnings\/earnings-calendar#source=earnings_calendar%3Aexpanded%3Anavbar_left)\n  - [Currencies](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/currencies#source=currencies%3Aexpanded%3Anavbar_left)\n  - [Cryptocurrency Prices](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/cryptocurrency#source=cryptocurrency_prices%3Aexpanded%3Anavbar_left)\n- [Sectors](https:\/\/seekingalpha.com\/sectors#source=sectors%3Aexpanded%3Anavbar_left)\n  \n  ## Sectors\n  - [Technology](https:\/\/seekingalpha.com\/sectors\/technology#source=technology%3Aexpanded%3Anavbar_left)\n  - [Financial](https:\/\/seekingalpha.com\/sectors\/financial#source=financial%3Aexpanded%3Anavbar_left)\n  - [Consumer Discretionary](https:\/\/seekingalpha.com\/sectors\/consumer-discretionary#source=consumer_discretionary%3Aexpanded%3Anavbar_left)\n  - [Communication](https:\/\/seekingalpha.com\/sectors\/communication-services#source=communication_services%3Aexpanded%3Anavbar_left)\n  - [Healthcare](https:\/\/seekingalpha.com\/sectors\/healthcare#source=healthcare%3Aexpanded%3Anavbar_left)\n  - [Industrials](https:\/\/seekingalpha.com\/sectors\/industrials#source=industrials%3Aexpanded%3Anavbar_left)\n  - [Consumer Staples](https:\/\/seekingalpha.com\/sectors\/consumer-staples#source=consumer_staples%3Aexpanded%3Anavbar_left)\n  - [Energy](https:\/\/seekingalpha.com\/sectors\/energy#source=energy%3Aexpanded%3Anavbar_left)\n  - [Materials](https:\/\/seekingalpha.com\/sectors\/materials#source=materials%3Aexpanded%3Anavbar_left)\n  - [Real Estate](https:\/\/seekingalpha.com\/sectors\/real-estate#source=real_estate%3Aexpanded%3Anavbar_left)\n  - [Utilities](https:\/\/seekingalpha.com\/sectors\/utilities#source=utilities%3Aexpanded%3Anavbar_left)\n- [Dividends](https:\/\/seekingalpha.com\/dividends#source=dividends%3Aexpanded%3Anavbar_left)\n  \n  ## Dividends\n  - [Top Dividend Stocks](https:\/\/seekingalpha.com\/screeners\/9679329c-Top-Dividend-Stocks#source=top_dividend_stocks%3Aexpanded%3Anavbar_left)\n  - [Top Quant Dividend Stocks](https:\/\/seekingalpha.com\/screeners\/9408317dce-Top-Quant-Dividend-Stocks#source=top_quant_dividend_stocks%3Aexpanded%3Anavbar_left)\n  - [Dividend Ideas](https:\/\/seekingalpha.com\/dividends\/dividend-ideas#source=dividend_ideas%3Aexpanded%3Anavbar_left)\n  - [Dividend Quick Picks](https:\/\/seekingalpha.com\/dividends\/dividend-quick-picks#source=dividend_quick_picks%3Aexpanded%3Anavbar_left)\n  - [Dividend Strategy](https:\/\/seekingalpha.com\/dividends\/dividend-strategy#source=dividend_strategy%3Aexpanded%3Anavbar_left)\n  - [Dividend News - Funds](https:\/\/seekingalpha.com\/market-news\/dividend-funds#source=dividend_news_funds%3Aexpanded%3Anavbar_left)\n  - [Dividend News - Stocks](https:\/\/seekingalpha.com\/market-news\/dividend-stocks#source=dividend_news_stocks%3Aexpanded%3Anavbar_left)\n  - [Dividends Data](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/dividends#source=etf_dividends%3Aexpanded%3Anavbar_left)\n- [ETFs](https:\/\/seekingalpha.com\/etfs-and-funds#source=etfs%3Aexpanded%3Anavbar_left)\n  \n  ## ETFs\n  - [Top Rated ETFs](https:\/\/seekingalpha.com\/screeners\/etfs\/922b797269-Top-Rated-ETFs#source=top_rated_etfs%3Aexpanded%3Anavbar_left)\n  - [ETF Strategies](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/strategies#source=etf_strategies%3Aexpanded%3Anavbar_left)\n  - [REITs & Real Estate ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/real_estate#source=reits_real_estate_etfs%3Aexpanded%3Anavbar_left)\n  - [Commodity ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/commodities#source=commodity_etfs%3Aexpanded%3Anavbar_left)\n  - [Emerging Markets ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/emerging_markets#source=emerging_markets_etfs%3Aexpanded%3Anavbar_left)\n  - [Growth vs. Value ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/growth_vs_value#source=growth_vs_value_etfs%3Aexpanded%3Anavbar_left)\n  - [Bonds](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/bonds#source=bonds%3Aexpanded%3Anavbar_left)\n  - [Country ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/countries#source=countries_etfs%3Aexpanded%3Anavbar_left)\n- [Earnings](https:\/\/seekingalpha.com\/market-news\/earnings#source=earnings%3Aexpanded%3Anavbar_left)\n  \n  ## Earnings\n  - [Earnings Calendar](https:\/\/seekingalpha.com\/earnings\/earnings-calendar#source=earnings_calendar%3Aexpanded%3Anavbar_left)\n  - [Earnings Call Transcripts](https:\/\/seekingalpha.com\/earnings\/earnings-call-transcripts#source=earnings_call_transcripts%3Aexpanded%3Anavbar_left)\n  - [Earnings Call Insights](https:\/\/seekingalpha.com\/market-news\/earnings-calls-insights#source=earnings_call_insights%3Aexpanded%3Anavbar_left)\n- [Education](https:\/\/seekingalpha.com\/investing-resources#source=education%3Aexpanded%3Anavbar_left)\n- [Podcasts](https:\/\/seekingalpha.com\/podcasts#source=podcasts%3Aexpanded%3Anavbar_left)\n- [Videos](https:\/\/seekingalpha.com\/videos#source=videos%3Aexpanded%3Anavbar_left)\n\n## Investing Groups\n- [Explore Investing Groups](https:\/\/seekingalpha.com\/marketplace\/directory#source=investing_groups%3Aexpanded%3Anavbar_left)\n\n## Portfolios\n- [Create Portfolio\\+](https:\/\/seekingalpha.com\/account\/portfolio#source=create_first_portfolio%3Aexpanded%3Anavbar_left)\n- [Portfolio Health Check](https:\/\/seekingalpha.com\/portfolio-health-check#source=portfolio_health_check%3Aexpanded%3Anavbar_left)\n- [About Portfolio](https:\/\/subscriptions.seekingalpha.com\/portfolio_about\/#source=about_portfolio%3Aexpanded%3Anavbar_left)\n\n## Find & Compare\n- [Stock Screener](https:\/\/seekingalpha.com\/screeners#source=stock_screener%3Aexpanded%3Anavbar_left)\n  \n  ## Stock Screener\n  - [All Stocks](https:\/\/seekingalpha.com\/screeners\/967aaa441702-All-Stocks#source=all_stocks%3Aexpanded%3Anavbar_left)\n  - [Top Rated Stocks](https:\/\/seekingalpha.com\/screeners\/96793299-Top-Rated-Stocks#source=top_rated_stocks%3Aexpanded%3Anavbar_left)\n  - [Top Growth Stocks](https:\/\/seekingalpha.com\/screeners\/9679348d-Top-Growth-Stocks#source=top_growth_stocks%3Aexpanded%3Anavbar_left)\n  - [Top Value Stocks](https:\/\/seekingalpha.com\/screeners\/96793482-Top-Value-Stocks#source=top_value_stocks%3Aexpanded%3Anavbar_left)\n  - [Top Small Cap Stocks](https:\/\/seekingalpha.com\/screeners\/967930eb-Top-Small-Cap-Stocks#source=top_small_cap_stocks%3Aexpanded%3Anavbar_left)\n  - [Stocks by Quant](https:\/\/seekingalpha.com\/screeners\/95b9990b-Stocks-by-Quant#source=stocks_by_quant%3Aexpanded%3Anavbar_left)\n  - [Most Shorted Stocks](https:\/\/seekingalpha.com\/screeners\/940d08e1dd-Most-Shorted-Stocks#source=most_shorted_stocks%3Aexpanded%3Anavbar_left)\n  - [Strong Buy Stocks - Short Squeeze](https:\/\/seekingalpha.com\/screeners\/940d0c9cca-Strong-Buy-Stocks-With-Short-Squeeze-Potential#source=strong_buy_stocks_short_squeeze%3Aexpanded%3Anavbar_left)\n  - [Top REITs](https:\/\/seekingalpha.com\/screeners\/9ecfb4dfa7-Top-REITs#source=top_reits%3Aexpanded%3Anavbar_left)\n- [ETF Screener](https:\/\/seekingalpha.com\/screeners\/etfs#source=etf_screener%3Aexpanded%3Anavbar_left)\n  \n  ## ETF Screener\n  - [All ETFs](https:\/\/seekingalpha.com\/screeners\/etfs\/967aaa441700-All-ETFs#source=all_etfs%3Aexpanded%3Anavbar_left)\n  - [Top Alternative ETFs](https:\/\/seekingalpha.com\/screeners\/etfs\/922b7973d1-Top-Alternative-ETFs#source=top_alternative_etfs%3Aexpanded%3Anavbar_left)\n  - [Top Commodities ETFs](https:\/\/seekingalpha.com\/screeners\/etfs\/922b7973d0-Top-Commodities-ETFs#source=top_commodities_etfs%3Aexpanded%3Anavbar_left)\n  - [Top International Equities ETFs](https:\/\/seekingalpha.com\/screeners\/etfs\/922b7973d4-Top-International-Equity-ETFs#source=top_international_equities_etfs%3Aexpanded%3Anavbar_left)\n  - [Top Sector Equity ETFs](https:\/\/seekingalpha.com\/screeners\/etfs\/922b7973d5-Top-Sector-Equity-ETFs#source=top_sector_equity_etfs%3Aexpanded%3Anavbar_left)\n  - [Top U.S. Equity ETFs](https:\/\/seekingalpha.com\/screeners\/etfs\/922b797268-Top-U-S--Equity-ETFs#source=top_us_equity_etfs%3Aexpanded%3Anavbar_left)\n  - [Most Shorted ETFs](https:\/\/seekingalpha.com\/screeners\/etfs\/9ecdd541a8-Most-Shorted-ETFs#source=most_shorted_etfs%3Aexpanded%3Anavbar_left)\n- [Comparisons](https:\/\/seekingalpha.com\/comparison#source=comparisons%3Aexpanded%3Anavbar_left)\n  \n  ## Comparisons\n  - [AI Stocks](https:\/\/seekingalpha.com\/comparison\/91b2fbba4e-Artificial-Intelligence-%28AI%29-Stocks#source=ai_stocks%3Aexpanded%3Anavbar_left)\n  - [5G Stocks](https:\/\/seekingalpha.com\/comparison\/91b2fdf02e-5G-Stocks#source=5g_stocks%3Aexpanded%3Anavbar_left)\n  - [Aerospace & Defense Stocks](https:\/\/seekingalpha.com\/comparison\/91b2fbba40-Aerospace-%26-Defense-Stocks#source=aerospace_defense_stocks%3Aexpanded%3Anavbar_left)\n  - [Dividend Stocks](https:\/\/seekingalpha.com\/comparison\/91b2fbb823-Dividend-Stocks#source=dividend_stocks%3Aexpanded%3Anavbar_left)\n  - [Value Stocks](https:\/\/seekingalpha.com\/comparison\/91b2fbb9fe-Value-Stocks#source=value_stocks%3Aexpanded%3Anavbar_left)\n  - [Blue Chip Stocks](https:\/\/seekingalpha.com\/comparison\/91b2fbbb60-Blue-Chip-Stocks#source=blue_chip_stocks%3Aexpanded%3Anavbar_left)\n  - [FAANG Stocks](https:\/\/seekingalpha.com\/comparison\/9e-FAANG-Stocks#source=faang_stocks%3Aexpanded%3Anavbar_left)\n  - [Gold ETFs](https:\/\/seekingalpha.com\/comparison\/9679-Gold-ETFs#source=gold-etfs%3Aexpanded%3Anavbar_left)\n  - [Cash Equivalents](https:\/\/seekingalpha.com\/comparison\/95bd-Cash-Equivalents#source=cash_equivalents%3Aexpanded%3Anavbar_left)\n  - [Big Bank Stocks](https:\/\/seekingalpha.com\/comparison\/9678-Big-Bank-Stocks#source=big_bank_stocks%3Aexpanded%3Anavbar_left)\n  - [Big Pharma Stocks](https:\/\/seekingalpha.com\/comparison\/967b-Big-Pharma-Stocks#source=big_pharma_stocks%3Aexpanded%3Anavbar_left)\n  - [Retail Stocks](https:\/\/seekingalpha.com\/comparison\/967a-Retail-Stocks#source=retail_stocks%3Aexpanded%3Anavbar_left)\n\n## Subscriptions\n- [Alpha Picks](https:\/\/seekingalpha.com\/#source=alpha-picks%3Aexpanded%3Anavbar_left)\n- [Premium & Pro](https:\/\/seekingalpha.com\/subscriptions#source=premium-pro%3Aexpanded%3Anavbar_left)\n\nSearch field\n\nEntering text into the input field will update the search result below\n\nEntering text into the input field will update the search result below\n\nCreate free account\n\n[Search for Symbols, analysts, keywords](https:\/\/seekingalpha.com\/basic-search \"Search\")\n\nLog in\n\nETF: Browse Topics\n\n1. [Education](https:\/\/seekingalpha.com\/education)\n2. [ETF](https:\/\/seekingalpha.com\/education\/etf)\n# Exchange Traded Fund (ETF): Explained\nUpdated: Apr 04, 2022By: [Kent Thune](https:\/\/seekingalpha.com\/author\/kent-thune#source=section%3Amain_content%7Csection_asset%3Ameta%7Cbutton%3Aauthor_name%7Cfirst_level_url%3Aarticle)\n\nTable of Contents\n\n1. [What is an ETF?](https:\/\/seekingalpha.com\/article\/4435888-what-is-an-etf#what-is-an-etf \"What is an ETF?\")\n2. [How Do ETFs Work?](https:\/\/seekingalpha.com\/article\/4435888-what-is-an-etf#how-do-etfs-work \"How Do ETFs Work?\")\n3. [Pros and Cons of ETFs](https:\/\/seekingalpha.com\/article\/4435888-what-is-an-etf#pros-and-cons-of-etfs \"Pros and Cons of ETFs\")\n4. [Types of ETFs](https:\/\/seekingalpha.com\/article\/4435888-what-is-an-etf#types-of-etfs \"Types of ETFs\")\n5. [ETFs vs. Mutual Funds](https:\/\/seekingalpha.com\/article\/4435888-what-is-an-etf#etfs-vs-mutual-funds \"ETFs vs. Mutual Funds\")\n6. [How to Invest in ETFs](https:\/\/seekingalpha.com\/article\/4435888-what-is-an-etf#how-to-invest-in-etfs \"How to Invest in ETFs\")\n7. [FAQ](https:\/\/seekingalpha.com\/article\/4435888-what-is-an-etf#faqs \"FAQ\")\n\nExpand\n\nExchange-traded funds, or ETFs, are versatile investment securities offering a wide range of benefits for investors. Whether you want to passively track a broad market index or invest in a niche area of the market, ETFs provide a low-cost, simple means of accessing a basket of securities in one fund.\n\n![the abbreviation word etf - Exchange Traded Fund - laid with silver letters on raw rusted steel sheet surface in slanted diagonal perspective](https:\/\/static.seekingalpha.com\/cdn\/s3\/uploads\/getty_images\/1215531977\/image_1215531977.jpg?io=getty-c-w750)\n\nz1b\/iStock via Getty Images\n## What is an ETF?\nAn ETF, or exchange-traded fund, is an investment security that combines some of the attributes of stocks and [mutual funds](https:\/\/seekingalpha.com\/article\/4434117-what-is-a-mutual-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). Like stocks, ETFs trade intra-day on an exchange. Like with mutual funds, many ETFs seek to track the performance of a benchmark index, such as the [S\\&P 500](https:\/\/seekingalpha.com\/article\/4442005-what-is-sp-500#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link).\n\n## How Do ETFs Work?\nWhen you buy an ETF, you're buying a basket of securities wrapped into one investment that trades on an exchange. Most ETFs passively track an underlying index, which is a representation of other securities or asset types, such as stocks, bonds, commodities, or currencies.\n\nShareholders of ETFs do not directly own shares of the underlying securities or [assets](https:\/\/seekingalpha.com\/article\/4434193-what-are-assets#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link); they own shares of the ETF itself. Also, while ETFs do trade on an exchange like stocks, the process of creating and redeeming shares is unique in the investment world.\n\nHere are the steps taken to create a typical ETF before investors can buy shares:\n\n1. An investment company or ETF manager, known as a sponsor, decides to create a new ETF.\n2. The ETF sponsor forms an arrangement with a third party, known as an authorized participant, or AP, which is typically a large financial institution.\n3. The AP purchases securities in the ETF's benchmark index, then exchanges them for a block of ETF shares of equal value, called \"creation units.\"\n4. The AP sells shares of the ETF to investors or market makers on an exchange.\n5. Investors can then buy and sell shares of the ETF, which is assigned a unique ticker symbol, on an exchange, much like a stock.\n## Pros and Cons of ETFs\nETFs have multiple advantages but they're not an ideal fit for every investor. As with any other type of security, investors are wise to weigh the pros and cons of ETFs and determine if these funds are appropriate for their unique investment goals and strategies.\n\n### Pros of ETFs\n- **[Diversification](https:\/\/seekingalpha.com\/article\/4436963-what-is-diversification-in-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** ETFs provide exposure to dozens, or even hundreds, of securities in just one basket. Exposure to multiple securities in a portfolio can reduce risk.\n- **Specialization:** Certain specialty ETFs enable access to niche areas of the market that may otherwise be inaccessible to most investors.\n- **Low cost:** Because ETFs are [passively managed](https:\/\/seekingalpha.com\/article\/4450452-active-vs-passive-funds#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), the operational costs are extremely low compared to actively managed portfolios. It's common for an ETF expense ratio to be lower than 0.10%, which is just \\$10 annually for every \\$10,000 of investments.\n- **[Tax-efficiency](https:\/\/seekingalpha.com\/article\/4494080-tax-efficient-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** For the ETFs that track a benchmark index, there is very little turnover (buying and selling within the portfolio), which minimizes management costs and taxable distributions to shareholders.\n- **[Market orders](https:\/\/seekingalpha.com\/article\/4455203-market-order#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** One of the stock-like aspects that can be a benefit for investors is the ability to place market orders, such as a stop-loss order or a limit order. This feature enables an investor to automate execution of trades at the best price possible.\n### **Cons of ETFs**\n- **Trading costs:** Many ETFs can be traded at zero commission and with no transaction fee. However, some brokers will charge commissions to trade certain ETFs on their platform. These commissions can negate the savings of the low expense ratios of ETFs and can really add up over time if an investor trades frequently.\n- **Illiquidity:** ETFs that have low [trading volumes](https:\/\/seekingalpha.com\/article\/4437223-what-does-volume-mean-stocks#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) can have wide bid-ask spreads, similar to many stocks with low trading volumes. The [bid-ask spread](https:\/\/seekingalpha.com\/article\/4448556-bid-vs-ask#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) is the amount by which the ask price exceeds the bid price. This spread can add to the cost of trading, which erodes the investor's return.\n- **Settlement:** As is the case with stocks, ETF settlement is T+2, which means you'll wait two days after the trade before it settles to cash. Mutual fund settlement is commonly T+1.\n\n> ***Tip:** To reduce trading costs and minimize liquidity issues, investors can look for ETFs with a multi-year track record and assets higher than \\$1 billion. Generally speaking, the more established the ETF and the larger the assets, the greater the trading volume will be and the better odds it will trade free of commission and have narrower bid-ask spreads on the price.*\n## Types of ETFs\nThere are many different types of ETFs but they can be broken down into six broad categories: equity, fixed-income, commodity, currency, real estate, and specialty ETFs.\n\n### 1\\. Equity ETFs\nThere are dozens of sub-categories within the equity ETF universe. Some of the more common equity ETF types include:\n\n- S\\&P 500 ETFs\n- [Dividend ETFs](https:\/\/seekingalpha.com\/article\/4456991-dividend-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [International ETFs](https:\/\/seekingalpha.com\/article\/4476482-what-is-international-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n\nEquity ETFs can be further categorized by objective, such as growth and value, and by market capitalization, including micro-, small-, mid-, large-, and mega-cap ETFs.\n\n### 2\\. Fixed-Income ETFs\nAlso known as [bond ETFs](https:\/\/seekingalpha.com\/article\/4476238-what-is-bond-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), these funds track bond market indices, such as the Bloomberg Barclays US Aggregate Bond Index.\n\nOther common [fixed-income](https:\/\/seekingalpha.com\/article\/4495307-fixed-income#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) ETF categories include:\n\n- [Government bond](https:\/\/seekingalpha.com\/article\/4487106-government-bonds#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- Corporate bond\n- Tax-free municipal bond\n- International bond\n- Emerging markets bond\n- High-yield bond\n### 3\\. Commodity ETFs\nRather than hold the physical asset, which can be inaccessible or impractical for an investor, [commodity ETFs](https:\/\/seekingalpha.com\/article\/4477195-what-is-commodity-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) track the price of a commodity, such as [gold](https:\/\/seekingalpha.com\/article\/4459389-top-performing-gold-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), grains or [oil](https:\/\/seekingalpha.com\/article\/4454375-how-to-invest-in-oil#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), or a basket of commodities, such as precious metals or agricultural ETFs.\n\nSome examples of [top-performing commodity ETFs](https:\/\/seekingalpha.com\/article\/4473674-top-performing-commodity-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) include:\n\n- [Gold ETFs](https:\/\/seekingalpha.com\/article\/4459389-top-performing-gold-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [Silver ETFs](https:\/\/seekingalpha.com\/article\/4473653-silver-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [Oil ETFs](https:\/\/seekingalpha.com\/article\/4489145-oil-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [Natural Gas ETFs](https:\/\/seekingalpha.com\/article\/4459039-natural-gas-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [Copper ETFs](https:\/\/seekingalpha.com\/article\/4496471-copper-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [Uranium ETFs](https:\/\/seekingalpha.com\/article\/4497323-uranium-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n### **4\\. Currency ETFs**\nAs is the case with commodities, [currency ETFs](https:\/\/seekingalpha.com\/article\/4476610-what-is-currency-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) provide exposure to currency markets and [foreign exchange trading (Forex)](https:\/\/seekingalpha.com\/article\/4448144-what-is-forex-trading#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) that may otherwise be inaccessible to the everyday investor. Currency ETFs may hold cash deposits in the currency being tracked or use [futures contracts](https:\/\/seekingalpha.com\/article\/4437307-what-are-stock-market-futures#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) on the underlying currency.\n\n### 5\\. Real Estate ETFs\nThese ETFs typically track an index of publicly traded real estate investment trusts, or REITs, which are companies that own, operate or finance income-generating real estate. Investors that buy [real estate or REIT ETFs](https:\/\/seekingalpha.com\/article\/4499268-reit-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are often seeking high-yielding investments.\n\n### 6\\. Specialty ETFs\nOne of the advantages of ETFs is specialization in [sectors](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/sectors#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) and other niche areas of the market. For example, [specialty ETFs](https:\/\/seekingalpha.com\/article\/4476225-what-is-sector-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) may invest in a sector of the economy, such as technology, or a more narrow sub-sector of technology, such as [Semiconductor ETFs](https:\/\/seekingalpha.com\/article\/4486862-semiconductor-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) or Artificial Intelligence ETFs. Other sectors include healthcare, industrials, consumer staples, consumer discretionary, financial services, and utilities.\n\n## ETFs vs. Mutual Funds\nETFs and mutual funds share some common features and benefits but there are also some noteworthy differences for investors to know. For example, [ETFs and mutual funds](https:\/\/seekingalpha.com\/article\/4456179-etf-vs-mutual-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are both baskets of securities packaged as a single fund but ETFs trade intra-day, whereas mutual funds settle at the close of the market.\n\n### Similarities\n- **Diversification:** Both fund types invest in a basket of securities, which makes them less risky than individual stocks and bonds.\n- **Variety of choice:** ETFs and mutual funds both cover a wide variety of asset types and security types for investors to choose from.\n- **Professional management:** Although [ETFs and index mutual funds](https:\/\/seekingalpha.com\/article\/4458010-index-etf-vs-index-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are passively managed, both types of funds are overseen by a professional manager or management company.\n### Differences\n- **Trading:** ETFs are priced and traded intra-day, like stocks, whereas mutual funds settle at the close of trading at the fund's net asset value, or NAV.\n- **Bid-Ask Spread:** Since ETFs trade like stocks, there can be a range, or spread, between the ask price and the bid price. This spread can add to the cost of trading. Mutual funds don't have a bid-ask spread.\n- **Initial Investment Amount:** ETFs can be purchased at the cost of one share. This is typically much lower than the minimum initial investment requirement of a mutual fund, which typically ranges between \\$1,000 and \\$3,000.\n\n> *Tip: ETFs are not guaranteed investments. Although ETFs are generally less volatile than individual stocks, investors can reduce risk further by investing in a variety of ETFs from diverse categories, such as different types of equity ETFs, fixed-income ETFs, and commodity ETFs.*\n## How to Invest in ETFs\nOne of the attractive qualities of [investing in ETFs](https:\/\/seekingalpha.com\/article\/4456918-invest-in-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) is that buying and selling shares is relatively easy. Because ETFs have been around for nearly 30 years, and they've risen dramatically in popularity since their inception, ETFs are standard products offered at most brokerage companies. The relative liquidity has given rise to a vibrant community of both ETF [traders and investors](https:\/\/seekingalpha.com\/article\/4434317-stock-trading-vs-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link).\n\nHere's how to buy an ETF:\n\n1. **Choose a brokerage firm**, such as a discount online broker like Charles Schwab, TD Ameritrade, or E\\*Trade, or a fund company like Vanguard or Fidelity, or an investment app like Robinhood.\n2. **Choose an account type**, such as a joint or [individual brokerage account](https:\/\/seekingalpha.com\/article\/4457684-brokerage-account#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), or a retirement account, like an IRA.\n3. **Open your account**, which can take a matter of minutes online.\n4. **Add money to your settlement account**, or core account, which is typically a money market account that receives and holds cash while it awaits trading in your brokerage account.\n5. **Choose your ETF**, which can be done with the aid of an [ETF screener](https:\/\/seekingalpha.com\/screeners\/etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link).\n6. **Buy shares of the ETF,** which is identified with a ticker symbol, by placing \"buy\" trade, selecting the number of shares to purchase, and submitting the trade during regular [market hours](https:\/\/seekingalpha.com\/article\/4434733-stock-market-holidays-and-hours#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), Monday through Friday, 9:30am EST to 4:00pm EST. This is largely the same as the [process for buys company stocks](https:\/\/seekingalpha.com\/article\/4432568-how-to-buy-stocks#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link).\n\n## FAQs\n- ### Do ETFs pay dividends?\n  Many ETFs pay distributions in the form of dividends in a similar way as stocks and mutual funds. Dividends are paid at periodic intervals, such as monthly, quarterly, semi-annually, or annually. These dividends are paid on stock held by the ETF.\n  \n  Investors may choose to receive the dividends as payments or to have them reinvest and buy more shares of the ETF. There are two basic types of dividends that ETFs typically pay to shareholders. They can be qualified dividends or non-qualified dividends and are identified on form 1099-DIV.\n- ### Are ETFs safe?\n  All investments carry some form of risk many ETFs are generally less volatile compared to individual stocks. Because ETFs are baskets of dozens or hundreds of securities in a single packaged security, investors can minimize risk through diversification. Generally, the more holdings in a portfolio, the lower the overall risk of a portfolio.\n\nThis article was written by\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/054\/435\/018\/big_pic.png?io=w36)\n\n[Kent Thune](https:\/\/seekingalpha.com\/author\/kent-thune#source=url_first_level%3Aarticle%7Csection%3Aauthor_root%3Akent-thune%7Csection_asset%3Aauthor_root%7Cauthor_name)\n\n1\\.29K Followers\n\nFollow\n\nKent Thune, CFP®, is a fiduciary investment advisor specializing in tactical asset allocation and portfolio management with a focus on ETFs and sector investing. Mr. Thune has 25 years of wealth management experience and has navigated clients through four bear markets and some of the most challenging economic environments in history. As a writer, Kent's articles have been seen on multiple investing and finance websites, including Seeking Alpha, Kiplinger, MarketWatch, The Motley Fool, Yahoo Finance, The Balance, and etf.com. Mr. Thune's registered investment advisory firm is headquartered in Hilton Head Island, SC where he serves clients across the country. When not writing or advising clients, Kent spends time with his wife and two sons, plays guitar, or works on the philosophy book he plans to publish by 2026.\n\nShow more\n\nShow more\n\n**Analyst’s Disclosure:** I\/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.\n\n**Seeking Alpha's Disclosure:** Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.\n\n- Like (1)\n- Share\n- Print\n- [Comments (2)](https:\/\/seekingalpha.com\/article\/4435888-what-is-an-etf#scroll_comments)\n\n### Recommended For You\n![](https:\/\/seekingalpha.com\/images\/users_profile\/021\/001\/961\/big_pic.png?io=w36&t=8659aa2ef5)\n\n### [U.S. And Iran Agree To Ceasefire](https:\/\/seekingalpha.com\/article\/4889147-u-s-and-iran-agree-to-ceasefire#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A1)\nWall Street Breakfast\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/062\/666\/168\/big_pic.png?io=w36&t=48f4aac16b)\n\n### [Why Alphabet's Growth Story Is Being Misread](https:\/\/seekingalpha.com\/article\/4889083-why-alphabets-growth-story-is-being-misread#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A2)\nInfinity Curve\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/000\/016\/392\/big_pic.png?io=w36&t=62dca12d65)\n\n### [I Demand Recurrent Income For My Retirement](https:\/\/seekingalpha.com\/article\/4888802-i-demand-recurrent-income-for-my-retirement#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A3)\nRida Morwa\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/057\/095\/211\/big_pic.png?io=w36&t=84c5d9f434)\n\n### [Micron, Credo, Lumentum: 3 AI Strong Buys](https:\/\/seekingalpha.com\/article\/4889062-micron-credo-lumentum-3-ai-strong-buys-still#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A4)\nInvesting Experts Podcast\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/050\/113\/560\/big_pic.png?io=w36&t=ee41bb6dcf)\n\n### [Fear Rising With Oil And War Uncertainty: 5 Strong Sell Stocks](https:\/\/seekingalpha.com\/article\/4889017-fear-rising-with-oil-and-war-uncertainty-5-strong-sell-stocks#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A5)\nSteven Cress, Quant Team\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/001\/379\/791\/big_pic.png?io=w36&t=064d12e00e)\n\n### [Energy Transfer: Discount To Enterprise Products No Longer Warranted](https:\/\/seekingalpha.com\/article\/4889167-energy-transfer-discount-to-enterprise-products-no-longer-warranted#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A6)\nCashFlow Hunter\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/017\/186\/012\/big_pic.png?io=w36&t=ef9e285ba2)\n\n### [I Shared 42 Sell Ratings In 2019 - 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You can remove the link by deleting the \\$ in the comment.\n\nPublish\n\nV\n\n[Vibhormittal](https:\/\/seekingalpha.com\/user\/57848905)\n\nFeb 27, 2023, 1:48 AM\n\n[Comments (1)](https:\/\/seekingalpha.com\/user\/57848905)\n\n\\|\n\n\\+ Follow\n\nGreat article for beginners to know ETF\n\nReply\n\nLike\n\n(1)\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/054\/435\/018\/small_pic.png?t=d4146b2a8f)\n\n[Kent Thune](https:\/\/seekingalpha.com\/author\/kent-thune)\n\nFeb 27, 2023, 6:43 AM\n\nPremium\n\n[Investing Group](https:\/\/seekingalpha.com\/checkout\/mp_1060#source=first_level_url%3Anews%7Csection%3Acomments%7Csection_asset%3Abadge%7Cbutton%3AInvesting%20Group)\n\n[Comments (2.15K)](https:\/\/seekingalpha.com\/author\/kent-thune)\n\n\\|\n\n\\+ Follow\n\n[@Vibhormittal](https:\/\/seekingalpha.com\/user\/57848905#source=section%3Acomment%7Csection_asset%3Acomment%7Cfirst_level_url%3Aarticle%7Ccontent_id%3A4435888%7Ccomment_id%3A94580313) Thank you! If you'd like to learn more about ETFs, I write educational articles about them on ETF.com. Here's a link to my articles:  \n[www.etf.com\/...](https:\/\/www.etf.com\/contributors\/kent-thune \"https:\/\/www.etf.com\/contributors\/kent-thune\")\n\nReply\n\nLike\n\nDisagree with this article? 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[Consumer Staples](https:\/\/seekingalpha.com\/sectors\/consumer-staples#source=footer)\n- [Utilities](https:\/\/seekingalpha.com\/sectors\/utilities#source=footer)\n- [Financials](https:\/\/seekingalpha.com\/sectors\/financial#source=footer)\n- [Industrials](https:\/\/seekingalpha.com\/sectors\/industrials#source=footer)\n***\n\n## [Stock Comparison Tools](https:\/\/seekingalpha.com\/comparison)\n- [FAANG Stocks](https:\/\/seekingalpha.com\/comparison\/9e-FAANG-Stocks#source=footer)\n- [Gold ETFs](https:\/\/seekingalpha.com\/comparison\/9679-Gold-ETFs#source=footer)\n- [Cash Equivalents](https:\/\/seekingalpha.com\/comparison\/95bd-Cash-Equivalents#source=footer)\n- [Big Bank Stocks](https:\/\/seekingalpha.com\/comparison\/9678-Big-Bank-Stocks#source=footer)\n- [Big Pharma Stocks](https:\/\/seekingalpha.com\/comparison\/967b-Big-Pharma-Stocks#source=footer)\n- [Retail Stocks](https:\/\/seekingalpha.com\/comparison\/967a-Retail-Stocks#source=footer)\n***\n\n## Top Indexes\n- [Dow Jones](https:\/\/seekingalpha.com\/symbol\/DJI#source=footer)\n- [S\\&P 500](https:\/\/seekingalpha.com\/symbol\/SP500#source=footer)\n- [Nasdaq](https:\/\/seekingalpha.com\/symbol\/COMP:IND#source=footer)\n- [Gold](https:\/\/seekingalpha.com\/symbol\/XAUUSD:CUR#source=footer)\n- [Bitcoin](https:\/\/seekingalpha.com\/symbol\/BTC-USD#source=footer)\n***\n\n## [Market Outlook](https:\/\/seekingalpha.com\/market-outlook)\n- [Today's Market](https:\/\/seekingalpha.com\/market-outlook\/todays-market#source=footer)\n- [US Economy](https:\/\/seekingalpha.com\/market-outlook\/us-economy#source=footer)\n- [Gold & Precious Metals](https:\/\/seekingalpha.com\/market-outlook\/gold-and-precious-metals#source=footer)\n- [Commodities](https:\/\/seekingalpha.com\/market-outlook\/commodities#source=footer)\n- [Forex](https:\/\/seekingalpha.com\/market-outlook\/forex#source=footer)\n- [Editors' Picks](https:\/\/seekingalpha.com\/market-outlook\/editors-picks#source=footer)\n- [Cryptocurrency](https:\/\/seekingalpha.com\/market-outlook\/cryptocurrency#source=footer)\n***\n\n## [Market Data](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/key_markets)\n- [Bond ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/bonds#source=footer)\n- [Commodity ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/commodities#source=footer)\n- [Country ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/countries#source=footer)\n- [Currency ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/currencies#source=footer)\n- [Dividend ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/dividends#source=footer)\n- [Emerging Market ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/emerging_markets#source=footer)\n- [Global and Regional ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/global_and_regions#source=footer)\n- [Growth vs. Value ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/growth_vs_value#source=footer)\n- [Market Cap ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/market_cap#source=footer)\n- [Real Estate ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/real_estate#source=footer)\n- [Sector ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/sectors#source=footer)\n- [ETF Strategies](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/strategies#source=footer)\n- [Smart Beta](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/smart_beta#source=footer)\n- [Themes & Subsectors ETFs](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/themes_and_subsectors#source=footer)\n- [Cryptocurrency](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/cryptocurrency#source=footer)\n***\n\n## [Market News](https:\/\/seekingalpha.com\/market-news)\n- [Top News](https:\/\/seekingalpha.com\/market-news\/top-news#source=footer)\n- [Trending News](https:\/\/seekingalpha.com\/market-news\/trending#source=footer)\n- [On the Move](https:\/\/seekingalpha.com\/market-news\/on-the-move#source=footer)\n- [Market Pulse](https:\/\/seekingalpha.com\/market-news\/market-pulse#source=footer)\n- [Global Markets](https:\/\/seekingalpha.com\/market-news\/global#source=footer)\n- [Notable Calls](https:\/\/seekingalpha.com\/market-news\/notable-calls#source=footer)\n- [Buybacks](https:\/\/seekingalpha.com\/market-news\/buybacks#source=footer)\n- [Commodities](https:\/\/seekingalpha.com\/market-news\/commodities#source=footer)\n- [Cryptocurrency](https:\/\/seekingalpha.com\/market-news\/cryptocurrency#source=footer)\n- [Debt\/Share Issuance](https:\/\/seekingalpha.com\/market-news\/issuance#source=footer)\n- [Dividends - Stocks](https:\/\/seekingalpha.com\/market-news\/dividend-stocks#source=footer)\n- [Dividends - Funds](https:\/\/seekingalpha.com\/market-news\/dividend-funds#source=footer)\n- [Guidance](https:\/\/seekingalpha.com\/market-news\/guidance#source=footer)\n- [IPOs](https:\/\/seekingalpha.com\/market-news\/ipos#source=footer)\n- [SPACs](https:\/\/seekingalpha.com\/market-news\/spacs#source=footer)\n- [Budget & Regulation](https:\/\/seekingalpha.com\/market-news\/budget-regulation#source=footer)\n- [Jobs & Employment](https:\/\/seekingalpha.com\/market-news\/jobs-employment#source=footer)\n- [Politics](https:\/\/seekingalpha.com\/market-news\/politics#source=footer)\n- [M\\&A](https:\/\/seekingalpha.com\/market-news\/m-a#source=footer)\n- [US Economy](https:\/\/seekingalpha.com\/market-news\/us-economy#source=footer)\n- [Wall Street Breakfast](https:\/\/seekingalpha.com\/market-news\/wall-street-breakfast#source=footer)\n***\n\n## News by Sector\n- [Consumer](https:\/\/seekingalpha.com\/market-news\/consumer#source=footer)\n- [Energy](https:\/\/seekingalpha.com\/market-news\/energy#source=footer)\n- [Financials](https:\/\/seekingalpha.com\/market-news\/financials#source=footer)\n- [Healthcare](https:\/\/seekingalpha.com\/market-news\/healthcare#source=footer)\n- [Tech](https:\/\/seekingalpha.com\/market-news\/technology#source=footer)\n***\n\n## Earnings\n- [Earnings Calendar](https:\/\/seekingalpha.com\/earnings\/earnings-calendar#source=footer)\n- [Earnings News](https:\/\/seekingalpha.com\/market-news\/earnings#source=footer)\n- [Earnings Analysis](https:\/\/seekingalpha.com\/earnings\/earnings-analysis#source=footer)\n- [Earnings Calls Transcripts](https:\/\/seekingalpha.com\/earnings\/earnings-call-transcripts#source=footer)\n***\n***\nContact us\n\n[Subscription Support: subscriptions@seekingalpha.com](mailto:subscriptions@seekingalpha.com)\n\n- [Contact Us](https:\/\/help.seekingalpha.com#source=footer)\n- [About Us](https:\/\/about.seekingalpha.com#source=footer)\n- [Group Subscriptions](https:\/\/subscriptions.seekingalpha.com\/group_subscriptions#source=footer)\n- 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Please [report it on our feedback forum.](https:\/\/help.seekingalpha.com\/kb-tickets\/new)\n\nIf you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.\n\n![](https:\/\/seekingalpha.com\/_sa_track\/samw\/noscript?noscript[disabled]=true)\n\n![](https:\/\/www.facebook.com\/tr?id=228550053985270&ev=PageView&noscript=1)","attrs_readable_markdown":"1. [Education](https:\/\/seekingalpha.com\/education)\n2. [ETF](https:\/\/seekingalpha.com\/education\/etf)\n\nTable of Contents\n\nExchange-traded funds, or ETFs, are versatile investment securities offering a wide range of benefits for investors. Whether you want to passively track a broad market index or invest in a niche area of the market, ETFs provide a low-cost, simple means of accessing a basket of securities in one fund.\n\n![the abbreviation word etf - Exchange Traded Fund - laid with silver letters on raw rusted steel sheet surface in slanted diagonal perspective](https:\/\/static.seekingalpha.com\/cdn\/s3\/uploads\/getty_images\/1215531977\/image_1215531977.jpg?io=getty-c-w750)\n\nz1b\/iStock via Getty Images\n\nAn ETF, or exchange-traded fund, is an investment security that combines some of the attributes of stocks and [mutual funds](https:\/\/seekingalpha.com\/article\/4434117-what-is-a-mutual-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). Like stocks, ETFs trade intra-day on an exchange. Like with mutual funds, many ETFs seek to track the performance of a benchmark index, such as the [S\\&P 500](https:\/\/seekingalpha.com\/article\/4442005-what-is-sp-500#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link).\n\n## How Do ETFs Work?\nWhen you buy an ETF, you're buying a basket of securities wrapped into one investment that trades on an exchange. Most ETFs passively track an underlying index, which is a representation of other securities or asset types, such as stocks, bonds, commodities, or currencies.\n\nShareholders of ETFs do not directly own shares of the underlying securities or [assets](https:\/\/seekingalpha.com\/article\/4434193-what-are-assets#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link); they own shares of the ETF itself. Also, while ETFs do trade on an exchange like stocks, the process of creating and redeeming shares is unique in the investment world.\n\nHere are the steps taken to create a typical ETF before investors can buy shares:\n\n1. An investment company or ETF manager, known as a sponsor, decides to create a new ETF.\n2. The ETF sponsor forms an arrangement with a third party, known as an authorized participant, or AP, which is typically a large financial institution.\n3. The AP purchases securities in the ETF's benchmark index, then exchanges them for a block of ETF shares of equal value, called \"creation units.\"\n4. The AP sells shares of the ETF to investors or market makers on an exchange.\n5. Investors can then buy and sell shares of the ETF, which is assigned a unique ticker symbol, on an exchange, much like a stock.\n## Pros and Cons of ETFs\nETFs have multiple advantages but they're not an ideal fit for every investor. As with any other type of security, investors are wise to weigh the pros and cons of ETFs and determine if these funds are appropriate for their unique investment goals and strategies.\n\n### Pros of ETFs\n- **[Diversification](https:\/\/seekingalpha.com\/article\/4436963-what-is-diversification-in-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** ETFs provide exposure to dozens, or even hundreds, of securities in just one basket. Exposure to multiple securities in a portfolio can reduce risk.\n- **Specialization:** Certain specialty ETFs enable access to niche areas of the market that may otherwise be inaccessible to most investors.\n- **Low cost:** Because ETFs are [passively managed](https:\/\/seekingalpha.com\/article\/4450452-active-vs-passive-funds#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), the operational costs are extremely low compared to actively managed portfolios. It's common for an ETF expense ratio to be lower than 0.10%, which is just \\$10 annually for every \\$10,000 of investments.\n- **[Tax-efficiency](https:\/\/seekingalpha.com\/article\/4494080-tax-efficient-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** For the ETFs that track a benchmark index, there is very little turnover (buying and selling within the portfolio), which minimizes management costs and taxable distributions to shareholders.\n- **[Market orders](https:\/\/seekingalpha.com\/article\/4455203-market-order#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** One of the stock-like aspects that can be a benefit for investors is the ability to place market orders, such as a stop-loss order or a limit order. This feature enables an investor to automate execution of trades at the best price possible.\n### **Cons of ETFs**\n- **Trading costs:** Many ETFs can be traded at zero commission and with no transaction fee. However, some brokers will charge commissions to trade certain ETFs on their platform. These commissions can negate the savings of the low expense ratios of ETFs and can really add up over time if an investor trades frequently.\n- **Illiquidity:** ETFs that have low [trading volumes](https:\/\/seekingalpha.com\/article\/4437223-what-does-volume-mean-stocks#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) can have wide bid-ask spreads, similar to many stocks with low trading volumes. The [bid-ask spread](https:\/\/seekingalpha.com\/article\/4448556-bid-vs-ask#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) is the amount by which the ask price exceeds the bid price. This spread can add to the cost of trading, which erodes the investor's return.\n- **Settlement:** As is the case with stocks, ETF settlement is T+2, which means you'll wait two days after the trade before it settles to cash. Mutual fund settlement is commonly T+1.\n\n> ***Tip:** To reduce trading costs and minimize liquidity issues, investors can look for ETFs with a multi-year track record and assets higher than \\$1 billion. Generally speaking, the more established the ETF and the larger the assets, the greater the trading volume will be and the better odds it will trade free of commission and have narrower bid-ask spreads on the price.*\n## Types of ETFs\nThere are many different types of ETFs but they can be broken down into six broad categories: equity, fixed-income, commodity, currency, real estate, and specialty ETFs.\n\n### 1\\. Equity ETFs\nThere are dozens of sub-categories within the equity ETF universe. Some of the more common equity ETF types include:\n\n- S\\&P 500 ETFs\n- [Dividend ETFs](https:\/\/seekingalpha.com\/article\/4456991-dividend-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [International ETFs](https:\/\/seekingalpha.com\/article\/4476482-what-is-international-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n\nEquity ETFs can be further categorized by objective, such as growth and value, and by market capitalization, including micro-, small-, mid-, large-, and mega-cap ETFs.\n\n### 2\\. Fixed-Income ETFs\nAlso known as [bond ETFs](https:\/\/seekingalpha.com\/article\/4476238-what-is-bond-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), these funds track bond market indices, such as the Bloomberg Barclays US Aggregate Bond Index.\n\nOther common [fixed-income](https:\/\/seekingalpha.com\/article\/4495307-fixed-income#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) ETF categories include:\n\n- [Government bond](https:\/\/seekingalpha.com\/article\/4487106-government-bonds#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- Corporate bond\n- Tax-free municipal bond\n- International bond\n- Emerging markets bond\n- High-yield bond\n### 3\\. Commodity ETFs\nRather than hold the physical asset, which can be inaccessible or impractical for an investor, [commodity ETFs](https:\/\/seekingalpha.com\/article\/4477195-what-is-commodity-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) track the price of a commodity, such as [gold](https:\/\/seekingalpha.com\/article\/4459389-top-performing-gold-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), grains or [oil](https:\/\/seekingalpha.com\/article\/4454375-how-to-invest-in-oil#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), or a basket of commodities, such as precious metals or agricultural ETFs.\n\nSome examples of [top-performing commodity ETFs](https:\/\/seekingalpha.com\/article\/4473674-top-performing-commodity-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) include:\n\n- [Gold ETFs](https:\/\/seekingalpha.com\/article\/4459389-top-performing-gold-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [Silver ETFs](https:\/\/seekingalpha.com\/article\/4473653-silver-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [Oil ETFs](https:\/\/seekingalpha.com\/article\/4489145-oil-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [Natural Gas ETFs](https:\/\/seekingalpha.com\/article\/4459039-natural-gas-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [Copper ETFs](https:\/\/seekingalpha.com\/article\/4496471-copper-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n- [Uranium ETFs](https:\/\/seekingalpha.com\/article\/4497323-uranium-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link)\n### **4\\. Currency ETFs**\nAs is the case with commodities, [currency ETFs](https:\/\/seekingalpha.com\/article\/4476610-what-is-currency-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) provide exposure to currency markets and [foreign exchange trading (Forex)](https:\/\/seekingalpha.com\/article\/4448144-what-is-forex-trading#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) that may otherwise be inaccessible to the everyday investor. Currency ETFs may hold cash deposits in the currency being tracked or use [futures contracts](https:\/\/seekingalpha.com\/article\/4437307-what-are-stock-market-futures#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) on the underlying currency.\n\n### 5\\. Real Estate ETFs\nThese ETFs typically track an index of publicly traded real estate investment trusts, or REITs, which are companies that own, operate or finance income-generating real estate. Investors that buy [real estate or REIT ETFs](https:\/\/seekingalpha.com\/article\/4499268-reit-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are often seeking high-yielding investments.\n\n### 6\\. Specialty ETFs\nOne of the advantages of ETFs is specialization in [sectors](https:\/\/seekingalpha.com\/etfs-and-funds\/etf-tables\/sectors#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) and other niche areas of the market. For example, [specialty ETFs](https:\/\/seekingalpha.com\/article\/4476225-what-is-sector-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) may invest in a sector of the economy, such as technology, or a more narrow sub-sector of technology, such as [Semiconductor ETFs](https:\/\/seekingalpha.com\/article\/4486862-semiconductor-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) or Artificial Intelligence ETFs. Other sectors include healthcare, industrials, consumer staples, consumer discretionary, financial services, and utilities.\n\n## ETFs vs. Mutual Funds\nETFs and mutual funds share some common features and benefits but there are also some noteworthy differences for investors to know. For example, [ETFs and mutual funds](https:\/\/seekingalpha.com\/article\/4456179-etf-vs-mutual-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are both baskets of securities packaged as a single fund but ETFs trade intra-day, whereas mutual funds settle at the close of the market.\n\n### Similarities\n- **Diversification:** Both fund types invest in a basket of securities, which makes them less risky than individual stocks and bonds.\n- **Variety of choice:** ETFs and mutual funds both cover a wide variety of asset types and security types for investors to choose from.\n- **Professional management:** Although [ETFs and index mutual funds](https:\/\/seekingalpha.com\/article\/4458010-index-etf-vs-index-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are passively managed, both types of funds are overseen by a professional manager or management company.\n### Differences\n- **Trading:** ETFs are priced and traded intra-day, like stocks, whereas mutual funds settle at the close of trading at the fund's net asset value, or NAV.\n- **Bid-Ask Spread:** Since ETFs trade like stocks, there can be a range, or spread, between the ask price and the bid price. This spread can add to the cost of trading. Mutual funds don't have a bid-ask spread.\n- **Initial Investment Amount:** ETFs can be purchased at the cost of one share. This is typically much lower than the minimum initial investment requirement of a mutual fund, which typically ranges between \\$1,000 and \\$3,000.\n\n> *Tip: ETFs are not guaranteed investments. Although ETFs are generally less volatile than individual stocks, investors can reduce risk further by investing in a variety of ETFs from diverse categories, such as different types of equity ETFs, fixed-income ETFs, and commodity ETFs.*\n## How to Invest in ETFs\nOne of the attractive qualities of [investing in ETFs](https:\/\/seekingalpha.com\/article\/4456918-invest-in-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) is that buying and selling shares is relatively easy. Because ETFs have been around for nearly 30 years, and they've risen dramatically in popularity since their inception, ETFs are standard products offered at most brokerage companies. The relative liquidity has given rise to a vibrant community of both ETF [traders and investors](https:\/\/seekingalpha.com\/article\/4434317-stock-trading-vs-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link).\n\nHere's how to buy an ETF:\n\n1. **Choose a brokerage firm**, such as a discount online broker like Charles Schwab, TD Ameritrade, or E\\*Trade, or a fund company like Vanguard or Fidelity, or an investment app like Robinhood.\n2. **Choose an account type**, such as a joint or [individual brokerage account](https:\/\/seekingalpha.com\/article\/4457684-brokerage-account#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), or a retirement account, like an IRA.\n3. **Open your account**, which can take a matter of minutes online.\n4. **Add money to your settlement account**, or core account, which is typically a money market account that receives and holds cash while it awaits trading in your brokerage account.\n5. **Choose your ETF**, which can be done with the aid of an [ETF screener](https:\/\/seekingalpha.com\/screeners\/etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link).\n6. **Buy shares of the ETF,** which is identified with a ticker symbol, by placing \"buy\" trade, selecting the number of shares to purchase, and submitting the trade during regular [market hours](https:\/\/seekingalpha.com\/article\/4434733-stock-market-holidays-and-hours#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), Monday through Friday, 9:30am EST to 4:00pm EST. This is largely the same as the [process for buys company stocks](https:\/\/seekingalpha.com\/article\/4432568-how-to-buy-stocks#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link).\n\n1\\.29K Followers\n\n**Analyst’s Disclosure:** I\/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.\n\n**Seeking Alpha's Disclosure:** Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.\n\nRecommended For You\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/021\/001\/961\/big_pic.png?io=w36&t=8659aa2ef5)\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/062\/666\/168\/big_pic.png?io=w36&t=48f4aac16b)\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/000\/016\/392\/big_pic.png?io=w36&t=62dca12d65)\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/057\/095\/211\/big_pic.png?io=w36&t=84c5d9f434)\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/050\/113\/560\/big_pic.png?io=w36&t=ee41bb6dcf)\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/001\/379\/791\/big_pic.png?io=w36&t=064d12e00e)\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/017\/186\/012\/big_pic.png?io=w36&t=ef9e285ba2)\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/062\/917\/110\/big_pic.png?io=w36&t=3a6c2b7123)\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/049\/853\/134\/big_pic.png?io=w36&t=372b4e6921)\n\n![](https:\/\/seekingalpha.com\/images\/users_profile\/000\/498\/952\/big_pic.png?io=w36&t=feb4c563dc)\n\nLearn More On ETF\n\n[![PCEF: Understanding The Structure And Suitability Of This CEF ETF article thumbnail](https:\/\/static.seekingalpha.com\/cdn\/s3\/uploads\/getty_images\/2220498288\/image_2220498288.jpg?io=w107)](https:\/\/seekingalpha.com\/article\/4884111-pcef-understanding-the-structure-and-suitability-of-this-cef-etf)\n\n[![BTCI: Squeezing Yield With This 'Bitcoin-Adjacent' Income ETF article thumbnail](https:\/\/static.seekingalpha.com\/cdn\/s3\/uploads\/getty_images\/911549620\/image_911549620.jpg?io=w107)](https:\/\/seekingalpha.com\/article\/4883801-btci-squeezing-yield-with-this-bitcoin-adjacent-income-etf)\n\n[![FDL: Basics Of The First Trust Morningstar Dividend Leaders Index Fund article thumbnail](https:\/\/static.seekingalpha.com\/cdn\/s3\/uploads\/getty_images\/2176080312\/image_2176080312.jpg?io=w107)](https:\/\/seekingalpha.com\/article\/4883798-fdl-basics-of-first-trust-morningstar-dividend-leaders-index-fund)\n\n[![BLCN: A Bet On Blockchain Technologies article thumbnail](https:\/\/static.seekingalpha.com\/cdn\/s3\/uploads\/getty_images\/2175580056\/image_2175580056.jpg?io=w107)](https:\/\/seekingalpha.com\/article\/4883780-blcn-a-bet-on-blockchain-technologies)\n\n[![AGQ: Important Considerations For This Highly Leveraged Silver ETF article thumbnail](https:\/\/static.seekingalpha.com\/cdn\/s3\/uploads\/getty_images\/2203217155\/image_2203217155.jpg?io=w107)](https:\/\/seekingalpha.com\/article\/4883723-agq-important-considerations-for-this-highly-leveraged-silver-etf)","meta_canonical":null,"ml_categories_json":"{\"\/Finance\":998,\"\/Finance\/Investing\":997,\"\/Finance\/Investing\/Funds\":970}","ml_types_json":"{\"\/Article\":989,\"\/Article\/Definitions\":784}","ml_intent_types_json":"{\"Informational\":999}","meta_language":"en","attrs_author":"Kent Thune","attrs_publish_time":1624298400,"attrs_original_publish_time":1624298400,"attrs_is_republished":0,"attrs_nr_words":"3246","attrs_boilerpipe_nr_words":"1736","body_ext_links_number":13,"body_int_links_number":242,"meta_nofollow":0,"meta_noarchive":0,"props_was_rendered":1,"src_redirect":"","download_time_msec":746,"download_ttfb_msec":741,"download_size":129962}

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Exchange Traded Fund (ETF): What It Is & How It Works | Seeking Alpha

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An ETF, or an Exchange Traded Fund, is a fund that tracks a specific asset or type of asset. Learn more about what they are, the different types, and how to invest in them.

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Education ETF Table of Contents Exchange-traded funds, or ETFs, are versatile investment securities offering a wide range of benefits for investors. Whether you want to passively track a broad market index or invest in a niche area of the market, ETFs provide a low-cost, simple means of accessing a basket of securities in one fund. z1b/iStock via Getty Images An ETF, or exchange-traded fund, is an investment security that combines some of the attributes of stocks and mutual funds . Like stocks, ETFs trade intra-day on an exchange. Like with mutual funds, many ETFs seek to track the performance of a benchmark index, such as the S&P 500 . How Do ETFs Work? When you buy an ETF, you're buying a basket of securities wrapped into one investment that trades on an exchange. Most ETFs passively track an underlying index, which is a representation of other securities or asset types, such as stocks, bonds, commodities, or currencies. Shareholders of ETFs do not directly own shares of the underlying securities or assets ; they own shares of the ETF itself. Also, while ETFs do trade on an exchange like stocks, the process of creating and redeeming shares is unique in the investment world. Here are the steps taken to create a typical ETF before investors can buy shares: An investment company or ETF manager, known as a sponsor, decides to create a new ETF. The ETF sponsor forms an arrangement with a third party, known as an authorized participant, or AP, which is typically a large financial institution. The AP purchases securities in the ETF's benchmark index, then exchanges them for a block of ETF shares of equal value, called "creation units." The AP sells shares of the ETF to investors or market makers on an exchange. Investors can then buy and sell shares of the ETF, which is assigned a unique ticker symbol, on an exchange, much like a stock. Pros and Cons of ETFs ETFs have multiple advantages but they're not an ideal fit for every investor. As with any other type of security, investors are wise to weigh the pros and cons of ETFs and determine if these funds are appropriate for their unique investment goals and strategies. Pros of ETFs Diversification : ETFs provide exposure to dozens, or even hundreds, of securities in just one basket. Exposure to multiple securities in a portfolio can reduce risk. Specialization: Certain specialty ETFs enable access to niche areas of the market that may otherwise be inaccessible to most investors. Low cost: Because ETFs are passively managed , the operational costs are extremely low compared to actively managed portfolios. It's common for an ETF expense ratio to be lower than 0.10%, which is just $10 annually for every $10,000 of investments. Tax-efficiency : For the ETFs that track a benchmark index, there is very little turnover (buying and selling within the portfolio), which minimizes management costs and taxable distributions to shareholders. Market orders : One of the stock-like aspects that can be a benefit for investors is the ability to place market orders, such as a stop-loss order or a limit order. This feature enables an investor to automate execution of trades at the best price possible. Cons of ETFs Trading costs: Many ETFs can be traded at zero commission and with no transaction fee. However, some brokers will charge commissions to trade certain ETFs on their platform. These commissions can negate the savings of the low expense ratios of ETFs and can really add up over time if an investor trades frequently. Illiquidity: ETFs that have low trading volumes can have wide bid-ask spreads, similar to many stocks with low trading volumes. The bid-ask spread is the amount by which the ask price exceeds the bid price. This spread can add to the cost of trading, which erodes the investor's return. Settlement: As is the case with stocks, ETF settlement is T+2, which means you'll wait two days after the trade before it settles to cash. Mutual fund settlement is commonly T+1. Tip: To reduce trading costs and minimize liquidity issues, investors can look for ETFs with a multi-year track record and assets higher than $1 billion. Generally speaking, the more established the ETF and the larger the assets, the greater the trading volume will be and the better odds it will trade free of commission and have narrower bid-ask spreads on the price. Types of ETFs There are many different types of ETFs but they can be broken down into six broad categories: equity, fixed-income, commodity, currency, real estate, and specialty ETFs. 1. Equity ETFs There are dozens of sub-categories within the equity ETF universe. Some of the more common equity ETF types include: S&P 500 ETFs Dividend ETFs International ETFs Equity ETFs can be further categorized by objective, such as growth and value, and by market capitalization, including micro-, small-, mid-, large-, and mega-cap ETFs. 2. Fixed-Income ETFs Also known as bond ETFs , these funds track bond market indices, such as the Bloomberg Barclays US Aggregate Bond Index. Other common fixed-income ETF categories include: Government bond Corporate bond Tax-free municipal bond International bond Emerging markets bond High-yield bond 3. Commodity ETFs Rather than hold the physical asset, which can be inaccessible or impractical for an investor, commodity ETFs track the price of a commodity, such as gold , grains or oil , or a basket of commodities, such as precious metals or agricultural ETFs. Some examples of top-performing commodity ETFs include: Gold ETFs Silver ETFs Oil ETFs Natural Gas ETFs Copper ETFs Uranium ETFs 4. Currency ETFs As is the case with commodities, currency ETFs provide exposure to currency markets and foreign exchange trading (Forex) that may otherwise be inaccessible to the everyday investor. Currency ETFs may hold cash deposits in the currency being tracked or use futures contracts on the underlying currency. 5. Real Estate ETFs These ETFs typically track an index of publicly traded real estate investment trusts, or REITs, which are companies that own, operate or finance income-generating real estate. Investors that buy real estate or REIT ETFs are often seeking high-yielding investments. 6. Specialty ETFs One of the advantages of ETFs is specialization in sectors and other niche areas of the market. For example, specialty ETFs may invest in a sector of the economy, such as technology, or a more narrow sub-sector of technology, such as Semiconductor ETFs or Artificial Intelligence ETFs. Other sectors include healthcare, industrials, consumer staples, consumer discretionary, financial services, and utilities. ETFs vs. Mutual Funds ETFs and mutual funds share some common features and benefits but there are also some noteworthy differences for investors to know. For example, ETFs and mutual funds are both baskets of securities packaged as a single fund but ETFs trade intra-day, whereas mutual funds settle at the close of the market. Similarities Diversification: Both fund types invest in a basket of securities, which makes them less risky than individual stocks and bonds. Variety of choice: ETFs and mutual funds both cover a wide variety of asset types and security types for investors to choose from. Professional management: Although ETFs and index mutual funds are passively managed, both types of funds are overseen by a professional manager or management company. Differences Trading: ETFs are priced and traded intra-day, like stocks, whereas mutual funds settle at the close of trading at the fund's net asset value, or NAV. Bid-Ask Spread: Since ETFs trade like stocks, there can be a range, or spread, between the ask price and the bid price. This spread can add to the cost of trading. Mutual funds don't have a bid-ask spread. Initial Investment Amount: ETFs can be purchased at the cost of one share. This is typically much lower than the minimum initial investment requirement of a mutual fund, which typically ranges between $1,000 and $3,000. Tip: ETFs are not guaranteed investments. Although ETFs are generally less volatile than individual stocks, investors can reduce risk further by investing in a variety of ETFs from diverse categories, such as different types of equity ETFs, fixed-income ETFs, and commodity ETFs. How to Invest in ETFs One of the attractive qualities of investing in ETFs is that buying and selling shares is relatively easy. Because ETFs have been around for nearly 30 years, and they've risen dramatically in popularity since their inception, ETFs are standard products offered at most brokerage companies. The relative liquidity has given rise to a vibrant community of both ETF traders and investors . Here's how to buy an ETF: Choose a brokerage firm , such as a discount online broker like Charles Schwab, TD Ameritrade, or E*Trade, or a fund company like Vanguard or Fidelity, or an investment app like Robinhood. Choose an account type , such as a joint or individual brokerage account , or a retirement account, like an IRA. Open your account , which can take a matter of minutes online. Add money to your settlement account , or core account, which is typically a money market account that receives and holds cash while it awaits trading in your brokerage account. Choose your ETF , which can be done with the aid of an ETF screener . Buy shares of the ETF, which is identified with a ticker symbol, by placing "buy" trade, selecting the number of shares to purchase, and submitting the trade during regular market hours , Monday through Friday, 9:30am EST to 4:00pm EST. This is largely the same as the process for buys company stocks . 1.29K Followers Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. Recommended For You Learn More On ETF

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[Education](https://seekingalpha.com/education) 2. [ETF](https://seekingalpha.com/education/etf) # Exchange Traded Fund (ETF): Explained Updated: Apr 04, 2022By: [Kent Thune](https://seekingalpha.com/author/kent-thune#source=section%3Amain_content%7Csection_asset%3Ameta%7Cbutton%3Aauthor_name%7Cfirst_level_url%3Aarticle) Table of Contents 1. [What is an ETF?](https://seekingalpha.com/article/4435888-what-is-an-etf#what-is-an-etf "What is an ETF?") 2. [How Do ETFs Work?](https://seekingalpha.com/article/4435888-what-is-an-etf#how-do-etfs-work "How Do ETFs Work?") 3. [Pros and Cons of ETFs](https://seekingalpha.com/article/4435888-what-is-an-etf#pros-and-cons-of-etfs "Pros and Cons of ETFs") 4. [Types of ETFs](https://seekingalpha.com/article/4435888-what-is-an-etf#types-of-etfs "Types of ETFs") 5. [ETFs vs. Mutual Funds](https://seekingalpha.com/article/4435888-what-is-an-etf#etfs-vs-mutual-funds "ETFs vs. Mutual Funds") 6. [How to Invest in ETFs](https://seekingalpha.com/article/4435888-what-is-an-etf#how-to-invest-in-etfs "How to Invest in ETFs") 7. [FAQ](https://seekingalpha.com/article/4435888-what-is-an-etf#faqs "FAQ") Expand Exchange-traded funds, or ETFs, are versatile investment securities offering a wide range of benefits for investors. Whether you want to passively track a broad market index or invest in a niche area of the market, ETFs provide a low-cost, simple means of accessing a basket of securities in one fund. ![the abbreviation word etf - Exchange Traded Fund - laid with silver letters on raw rusted steel sheet surface in slanted diagonal perspective](https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1215531977/image_1215531977.jpg?io=getty-c-w750) z1b/iStock via Getty Images ## What is an ETF? An ETF, or exchange-traded fund, is an investment security that combines some of the attributes of stocks and [mutual funds](https://seekingalpha.com/article/4434117-what-is-a-mutual-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). Like stocks, ETFs trade intra-day on an exchange. Like with mutual funds, many ETFs seek to track the performance of a benchmark index, such as the [S\&P 500](https://seekingalpha.com/article/4442005-what-is-sp-500#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). ## How Do ETFs Work? When you buy an ETF, you're buying a basket of securities wrapped into one investment that trades on an exchange. Most ETFs passively track an underlying index, which is a representation of other securities or asset types, such as stocks, bonds, commodities, or currencies. Shareholders of ETFs do not directly own shares of the underlying securities or [assets](https://seekingalpha.com/article/4434193-what-are-assets#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link); they own shares of the ETF itself. Also, while ETFs do trade on an exchange like stocks, the process of creating and redeeming shares is unique in the investment world. Here are the steps taken to create a typical ETF before investors can buy shares: 1. An investment company or ETF manager, known as a sponsor, decides to create a new ETF. 2. The ETF sponsor forms an arrangement with a third party, known as an authorized participant, or AP, which is typically a large financial institution. 3. The AP purchases securities in the ETF's benchmark index, then exchanges them for a block of ETF shares of equal value, called "creation units." 4. The AP sells shares of the ETF to investors or market makers on an exchange. 5. Investors can then buy and sell shares of the ETF, which is assigned a unique ticker symbol, on an exchange, much like a stock. ## Pros and Cons of ETFs ETFs have multiple advantages but they're not an ideal fit for every investor. As with any other type of security, investors are wise to weigh the pros and cons of ETFs and determine if these funds are appropriate for their unique investment goals and strategies. ### Pros of ETFs - **[Diversification](https://seekingalpha.com/article/4436963-what-is-diversification-in-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** ETFs provide exposure to dozens, or even hundreds, of securities in just one basket. Exposure to multiple securities in a portfolio can reduce risk. - **Specialization:** Certain specialty ETFs enable access to niche areas of the market that may otherwise be inaccessible to most investors. - **Low cost:** Because ETFs are [passively managed](https://seekingalpha.com/article/4450452-active-vs-passive-funds#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), the operational costs are extremely low compared to actively managed portfolios. It's common for an ETF expense ratio to be lower than 0.10%, which is just \$10 annually for every \$10,000 of investments. - **[Tax-efficiency](https://seekingalpha.com/article/4494080-tax-efficient-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** For the ETFs that track a benchmark index, there is very little turnover (buying and selling within the portfolio), which minimizes management costs and taxable distributions to shareholders. - **[Market orders](https://seekingalpha.com/article/4455203-market-order#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** One of the stock-like aspects that can be a benefit for investors is the ability to place market orders, such as a stop-loss order or a limit order. This feature enables an investor to automate execution of trades at the best price possible. ### **Cons of ETFs** - **Trading costs:** Many ETFs can be traded at zero commission and with no transaction fee. However, some brokers will charge commissions to trade certain ETFs on their platform. These commissions can negate the savings of the low expense ratios of ETFs and can really add up over time if an investor trades frequently. - **Illiquidity:** ETFs that have low [trading volumes](https://seekingalpha.com/article/4437223-what-does-volume-mean-stocks#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) can have wide bid-ask spreads, similar to many stocks with low trading volumes. The [bid-ask spread](https://seekingalpha.com/article/4448556-bid-vs-ask#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) is the amount by which the ask price exceeds the bid price. This spread can add to the cost of trading, which erodes the investor's return. - **Settlement:** As is the case with stocks, ETF settlement is T+2, which means you'll wait two days after the trade before it settles to cash. Mutual fund settlement is commonly T+1. > ***Tip:** To reduce trading costs and minimize liquidity issues, investors can look for ETFs with a multi-year track record and assets higher than \$1 billion. Generally speaking, the more established the ETF and the larger the assets, the greater the trading volume will be and the better odds it will trade free of commission and have narrower bid-ask spreads on the price.* ## Types of ETFs There are many different types of ETFs but they can be broken down into six broad categories: equity, fixed-income, commodity, currency, real estate, and specialty ETFs. ### 1\. Equity ETFs There are dozens of sub-categories within the equity ETF universe. Some of the more common equity ETF types include: - S\&P 500 ETFs - [Dividend ETFs](https://seekingalpha.com/article/4456991-dividend-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [International ETFs](https://seekingalpha.com/article/4476482-what-is-international-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) Equity ETFs can be further categorized by objective, such as growth and value, and by market capitalization, including micro-, small-, mid-, large-, and mega-cap ETFs. ### 2\. Fixed-Income ETFs Also known as [bond ETFs](https://seekingalpha.com/article/4476238-what-is-bond-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), these funds track bond market indices, such as the Bloomberg Barclays US Aggregate Bond Index. Other common [fixed-income](https://seekingalpha.com/article/4495307-fixed-income#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) ETF categories include: - [Government bond](https://seekingalpha.com/article/4487106-government-bonds#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - Corporate bond - Tax-free municipal bond - International bond - Emerging markets bond - High-yield bond ### 3\. Commodity ETFs Rather than hold the physical asset, which can be inaccessible or impractical for an investor, [commodity ETFs](https://seekingalpha.com/article/4477195-what-is-commodity-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) track the price of a commodity, such as [gold](https://seekingalpha.com/article/4459389-top-performing-gold-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), grains or [oil](https://seekingalpha.com/article/4454375-how-to-invest-in-oil#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), or a basket of commodities, such as precious metals or agricultural ETFs. Some examples of [top-performing commodity ETFs](https://seekingalpha.com/article/4473674-top-performing-commodity-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) include: - [Gold ETFs](https://seekingalpha.com/article/4459389-top-performing-gold-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [Silver ETFs](https://seekingalpha.com/article/4473653-silver-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [Oil ETFs](https://seekingalpha.com/article/4489145-oil-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [Natural Gas ETFs](https://seekingalpha.com/article/4459039-natural-gas-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [Copper ETFs](https://seekingalpha.com/article/4496471-copper-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [Uranium ETFs](https://seekingalpha.com/article/4497323-uranium-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) ### **4\. Currency ETFs** As is the case with commodities, [currency ETFs](https://seekingalpha.com/article/4476610-what-is-currency-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) provide exposure to currency markets and [foreign exchange trading (Forex)](https://seekingalpha.com/article/4448144-what-is-forex-trading#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) that may otherwise be inaccessible to the everyday investor. Currency ETFs may hold cash deposits in the currency being tracked or use [futures contracts](https://seekingalpha.com/article/4437307-what-are-stock-market-futures#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) on the underlying currency. ### 5\. Real Estate ETFs These ETFs typically track an index of publicly traded real estate investment trusts, or REITs, which are companies that own, operate or finance income-generating real estate. Investors that buy [real estate or REIT ETFs](https://seekingalpha.com/article/4499268-reit-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are often seeking high-yielding investments. ### 6\. Specialty ETFs One of the advantages of ETFs is specialization in [sectors](https://seekingalpha.com/etfs-and-funds/etf-tables/sectors#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) and other niche areas of the market. For example, [specialty ETFs](https://seekingalpha.com/article/4476225-what-is-sector-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) may invest in a sector of the economy, such as technology, or a more narrow sub-sector of technology, such as [Semiconductor ETFs](https://seekingalpha.com/article/4486862-semiconductor-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) or Artificial Intelligence ETFs. Other sectors include healthcare, industrials, consumer staples, consumer discretionary, financial services, and utilities. ## ETFs vs. Mutual Funds ETFs and mutual funds share some common features and benefits but there are also some noteworthy differences for investors to know. For example, [ETFs and mutual funds](https://seekingalpha.com/article/4456179-etf-vs-mutual-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are both baskets of securities packaged as a single fund but ETFs trade intra-day, whereas mutual funds settle at the close of the market. ### Similarities - **Diversification:** Both fund types invest in a basket of securities, which makes them less risky than individual stocks and bonds. - **Variety of choice:** ETFs and mutual funds both cover a wide variety of asset types and security types for investors to choose from. - **Professional management:** Although [ETFs and index mutual funds](https://seekingalpha.com/article/4458010-index-etf-vs-index-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are passively managed, both types of funds are overseen by a professional manager or management company. ### Differences - **Trading:** ETFs are priced and traded intra-day, like stocks, whereas mutual funds settle at the close of trading at the fund's net asset value, or NAV. - **Bid-Ask Spread:** Since ETFs trade like stocks, there can be a range, or spread, between the ask price and the bid price. This spread can add to the cost of trading. Mutual funds don't have a bid-ask spread. - **Initial Investment Amount:** ETFs can be purchased at the cost of one share. This is typically much lower than the minimum initial investment requirement of a mutual fund, which typically ranges between \$1,000 and \$3,000. > *Tip: ETFs are not guaranteed investments. Although ETFs are generally less volatile than individual stocks, investors can reduce risk further by investing in a variety of ETFs from diverse categories, such as different types of equity ETFs, fixed-income ETFs, and commodity ETFs.* ## How to Invest in ETFs One of the attractive qualities of [investing in ETFs](https://seekingalpha.com/article/4456918-invest-in-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) is that buying and selling shares is relatively easy. Because ETFs have been around for nearly 30 years, and they've risen dramatically in popularity since their inception, ETFs are standard products offered at most brokerage companies. The relative liquidity has given rise to a vibrant community of both ETF [traders and investors](https://seekingalpha.com/article/4434317-stock-trading-vs-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). Here's how to buy an ETF: 1. **Choose a brokerage firm**, such as a discount online broker like Charles Schwab, TD Ameritrade, or E\*Trade, or a fund company like Vanguard or Fidelity, or an investment app like Robinhood. 2. **Choose an account type**, such as a joint or [individual brokerage account](https://seekingalpha.com/article/4457684-brokerage-account#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), or a retirement account, like an IRA. 3. **Open your account**, which can take a matter of minutes online. 4. **Add money to your settlement account**, or core account, which is typically a money market account that receives and holds cash while it awaits trading in your brokerage account. 5. **Choose your ETF**, which can be done with the aid of an [ETF screener](https://seekingalpha.com/screeners/etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). 6. **Buy shares of the ETF,** which is identified with a ticker symbol, by placing "buy" trade, selecting the number of shares to purchase, and submitting the trade during regular [market hours](https://seekingalpha.com/article/4434733-stock-market-holidays-and-hours#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), Monday through Friday, 9:30am EST to 4:00pm EST. This is largely the same as the [process for buys company stocks](https://seekingalpha.com/article/4432568-how-to-buy-stocks#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). ## FAQs - ### Do ETFs pay dividends? Many ETFs pay distributions in the form of dividends in a similar way as stocks and mutual funds. Dividends are paid at periodic intervals, such as monthly, quarterly, semi-annually, or annually. These dividends are paid on stock held by the ETF. Investors may choose to receive the dividends as payments or to have them reinvest and buy more shares of the ETF. There are two basic types of dividends that ETFs typically pay to shareholders. They can be qualified dividends or non-qualified dividends and are identified on form 1099-DIV. - ### Are ETFs safe? All investments carry some form of risk many ETFs are generally less volatile compared to individual stocks. Because ETFs are baskets of dozens or hundreds of securities in a single packaged security, investors can minimize risk through diversification. Generally, the more holdings in a portfolio, the lower the overall risk of a portfolio. This article was written by ![](https://seekingalpha.com/images/users_profile/054/435/018/big_pic.png?io=w36) [Kent Thune](https://seekingalpha.com/author/kent-thune#source=url_first_level%3Aarticle%7Csection%3Aauthor_root%3Akent-thune%7Csection_asset%3Aauthor_root%7Cauthor_name) 1\.29K Followers Follow Kent Thune, CFP®, is a fiduciary investment advisor specializing in tactical asset allocation and portfolio management with a focus on ETFs and sector investing. Mr. Thune has 25 years of wealth management experience and has navigated clients through four bear markets and some of the most challenging economic environments in history. As a writer, Kent's articles have been seen on multiple investing and finance websites, including Seeking Alpha, Kiplinger, MarketWatch, The Motley Fool, Yahoo Finance, The Balance, and etf.com. Mr. Thune's registered investment advisory firm is headquartered in Hilton Head Island, SC where he serves clients across the country. When not writing or advising clients, Kent spends time with his wife and two sons, plays guitar, or works on the philosophy book he plans to publish by 2026. Show more Show more **Analyst’s Disclosure:** I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. **Seeking Alpha's Disclosure:** Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. - Like (1) - Share - Print - [Comments (2)](https://seekingalpha.com/article/4435888-what-is-an-etf#scroll_comments) ### Recommended For You ![](https://seekingalpha.com/images/users_profile/021/001/961/big_pic.png?io=w36&t=8659aa2ef5) ### [U.S. And Iran Agree To Ceasefire](https://seekingalpha.com/article/4889147-u-s-and-iran-agree-to-ceasefire#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A1) Wall Street Breakfast ![](https://seekingalpha.com/images/users_profile/062/666/168/big_pic.png?io=w36&t=48f4aac16b) ### [Why Alphabet's Growth Story Is Being Misread](https://seekingalpha.com/article/4889083-why-alphabets-growth-story-is-being-misread#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A2) Infinity Curve ![](https://seekingalpha.com/images/users_profile/000/016/392/big_pic.png?io=w36&t=62dca12d65) ### [I Demand Recurrent Income For My Retirement](https://seekingalpha.com/article/4888802-i-demand-recurrent-income-for-my-retirement#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A3) Rida Morwa ![](https://seekingalpha.com/images/users_profile/057/095/211/big_pic.png?io=w36&t=84c5d9f434) ### [Micron, Credo, Lumentum: 3 AI Strong Buys](https://seekingalpha.com/article/4889062-micron-credo-lumentum-3-ai-strong-buys-still#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A4) Investing Experts Podcast ![](https://seekingalpha.com/images/users_profile/050/113/560/big_pic.png?io=w36&t=ee41bb6dcf) ### [Fear Rising With Oil And War Uncertainty: 5 Strong Sell Stocks](https://seekingalpha.com/article/4889017-fear-rising-with-oil-and-war-uncertainty-5-strong-sell-stocks#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A5) Steven Cress, Quant Team ![](https://seekingalpha.com/images/users_profile/001/379/791/big_pic.png?io=w36&t=064d12e00e) ### [Energy Transfer: Discount To Enterprise Products No Longer Warranted](https://seekingalpha.com/article/4889167-energy-transfer-discount-to-enterprise-products-no-longer-warranted#source=section%3Arecommended_for_you%7Csection_asset%3Aintegrated%7Cfirst_level_url%3Aarticle%7Cvariation_group%3Avariation_a%7Cline%3A6) CashFlow Hunter ![](https://seekingalpha.com/images/users_profile/017/186/012/big_pic.png?io=w36&t=ef9e285ba2) ### [I Shared 42 Sell Ratings In 2019 - 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You can remove the link by deleting the \$ in the comment. Publish V [Vibhormittal](https://seekingalpha.com/user/57848905) Feb 27, 2023, 1:48 AM [Comments (1)](https://seekingalpha.com/user/57848905) \| \+ Follow Great article for beginners to know ETF Reply Like (1) ![](https://seekingalpha.com/images/users_profile/054/435/018/small_pic.png?t=d4146b2a8f) [Kent Thune](https://seekingalpha.com/author/kent-thune) Feb 27, 2023, 6:43 AM Premium [Investing Group](https://seekingalpha.com/checkout/mp_1060#source=first_level_url%3Anews%7Csection%3Acomments%7Csection_asset%3Abadge%7Cbutton%3AInvesting%20Group) [Comments (2.15K)](https://seekingalpha.com/author/kent-thune) \| \+ Follow [@Vibhormittal](https://seekingalpha.com/user/57848905#source=section%3Acomment%7Csection_asset%3Acomment%7Cfirst_level_url%3Aarticle%7Ccontent_id%3A4435888%7Ccomment_id%3A94580313) Thank you! If you'd like to learn more about ETFs, I write educational articles about them on ETF.com. 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1. [Education](https://seekingalpha.com/education) 2. [ETF](https://seekingalpha.com/education/etf) Table of Contents Exchange-traded funds, or ETFs, are versatile investment securities offering a wide range of benefits for investors. Whether you want to passively track a broad market index or invest in a niche area of the market, ETFs provide a low-cost, simple means of accessing a basket of securities in one fund. ![the abbreviation word etf - Exchange Traded Fund - laid with silver letters on raw rusted steel sheet surface in slanted diagonal perspective](https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1215531977/image_1215531977.jpg?io=getty-c-w750) z1b/iStock via Getty Images An ETF, or exchange-traded fund, is an investment security that combines some of the attributes of stocks and [mutual funds](https://seekingalpha.com/article/4434117-what-is-a-mutual-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). Like stocks, ETFs trade intra-day on an exchange. Like with mutual funds, many ETFs seek to track the performance of a benchmark index, such as the [S\&P 500](https://seekingalpha.com/article/4442005-what-is-sp-500#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). ## How Do ETFs Work? When you buy an ETF, you're buying a basket of securities wrapped into one investment that trades on an exchange. Most ETFs passively track an underlying index, which is a representation of other securities or asset types, such as stocks, bonds, commodities, or currencies. Shareholders of ETFs do not directly own shares of the underlying securities or [assets](https://seekingalpha.com/article/4434193-what-are-assets#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link); they own shares of the ETF itself. Also, while ETFs do trade on an exchange like stocks, the process of creating and redeeming shares is unique in the investment world. Here are the steps taken to create a typical ETF before investors can buy shares: 1. An investment company or ETF manager, known as a sponsor, decides to create a new ETF. 2. The ETF sponsor forms an arrangement with a third party, known as an authorized participant, or AP, which is typically a large financial institution. 3. The AP purchases securities in the ETF's benchmark index, then exchanges them for a block of ETF shares of equal value, called "creation units." 4. The AP sells shares of the ETF to investors or market makers on an exchange. 5. Investors can then buy and sell shares of the ETF, which is assigned a unique ticker symbol, on an exchange, much like a stock. ## Pros and Cons of ETFs ETFs have multiple advantages but they're not an ideal fit for every investor. As with any other type of security, investors are wise to weigh the pros and cons of ETFs and determine if these funds are appropriate for their unique investment goals and strategies. ### Pros of ETFs - **[Diversification](https://seekingalpha.com/article/4436963-what-is-diversification-in-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** ETFs provide exposure to dozens, or even hundreds, of securities in just one basket. Exposure to multiple securities in a portfolio can reduce risk. - **Specialization:** Certain specialty ETFs enable access to niche areas of the market that may otherwise be inaccessible to most investors. - **Low cost:** Because ETFs are [passively managed](https://seekingalpha.com/article/4450452-active-vs-passive-funds#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), the operational costs are extremely low compared to actively managed portfolios. It's common for an ETF expense ratio to be lower than 0.10%, which is just \$10 annually for every \$10,000 of investments. - **[Tax-efficiency](https://seekingalpha.com/article/4494080-tax-efficient-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** For the ETFs that track a benchmark index, there is very little turnover (buying and selling within the portfolio), which minimizes management costs and taxable distributions to shareholders. - **[Market orders](https://seekingalpha.com/article/4455203-market-order#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link):** One of the stock-like aspects that can be a benefit for investors is the ability to place market orders, such as a stop-loss order or a limit order. This feature enables an investor to automate execution of trades at the best price possible. ### **Cons of ETFs** - **Trading costs:** Many ETFs can be traded at zero commission and with no transaction fee. However, some brokers will charge commissions to trade certain ETFs on their platform. These commissions can negate the savings of the low expense ratios of ETFs and can really add up over time if an investor trades frequently. - **Illiquidity:** ETFs that have low [trading volumes](https://seekingalpha.com/article/4437223-what-does-volume-mean-stocks#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) can have wide bid-ask spreads, similar to many stocks with low trading volumes. The [bid-ask spread](https://seekingalpha.com/article/4448556-bid-vs-ask#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) is the amount by which the ask price exceeds the bid price. This spread can add to the cost of trading, which erodes the investor's return. - **Settlement:** As is the case with stocks, ETF settlement is T+2, which means you'll wait two days after the trade before it settles to cash. Mutual fund settlement is commonly T+1. > ***Tip:** To reduce trading costs and minimize liquidity issues, investors can look for ETFs with a multi-year track record and assets higher than \$1 billion. Generally speaking, the more established the ETF and the larger the assets, the greater the trading volume will be and the better odds it will trade free of commission and have narrower bid-ask spreads on the price.* ## Types of ETFs There are many different types of ETFs but they can be broken down into six broad categories: equity, fixed-income, commodity, currency, real estate, and specialty ETFs. ### 1\. Equity ETFs There are dozens of sub-categories within the equity ETF universe. Some of the more common equity ETF types include: - S\&P 500 ETFs - [Dividend ETFs](https://seekingalpha.com/article/4456991-dividend-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [International ETFs](https://seekingalpha.com/article/4476482-what-is-international-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) Equity ETFs can be further categorized by objective, such as growth and value, and by market capitalization, including micro-, small-, mid-, large-, and mega-cap ETFs. ### 2\. Fixed-Income ETFs Also known as [bond ETFs](https://seekingalpha.com/article/4476238-what-is-bond-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), these funds track bond market indices, such as the Bloomberg Barclays US Aggregate Bond Index. Other common [fixed-income](https://seekingalpha.com/article/4495307-fixed-income#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) ETF categories include: - [Government bond](https://seekingalpha.com/article/4487106-government-bonds#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - Corporate bond - Tax-free municipal bond - International bond - Emerging markets bond - High-yield bond ### 3\. Commodity ETFs Rather than hold the physical asset, which can be inaccessible or impractical for an investor, [commodity ETFs](https://seekingalpha.com/article/4477195-what-is-commodity-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) track the price of a commodity, such as [gold](https://seekingalpha.com/article/4459389-top-performing-gold-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), grains or [oil](https://seekingalpha.com/article/4454375-how-to-invest-in-oil#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), or a basket of commodities, such as precious metals or agricultural ETFs. Some examples of [top-performing commodity ETFs](https://seekingalpha.com/article/4473674-top-performing-commodity-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) include: - [Gold ETFs](https://seekingalpha.com/article/4459389-top-performing-gold-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [Silver ETFs](https://seekingalpha.com/article/4473653-silver-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [Oil ETFs](https://seekingalpha.com/article/4489145-oil-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [Natural Gas ETFs](https://seekingalpha.com/article/4459039-natural-gas-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [Copper ETFs](https://seekingalpha.com/article/4496471-copper-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) - [Uranium ETFs](https://seekingalpha.com/article/4497323-uranium-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) ### **4\. Currency ETFs** As is the case with commodities, [currency ETFs](https://seekingalpha.com/article/4476610-what-is-currency-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) provide exposure to currency markets and [foreign exchange trading (Forex)](https://seekingalpha.com/article/4448144-what-is-forex-trading#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) that may otherwise be inaccessible to the everyday investor. Currency ETFs may hold cash deposits in the currency being tracked or use [futures contracts](https://seekingalpha.com/article/4437307-what-are-stock-market-futures#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) on the underlying currency. ### 5\. Real Estate ETFs These ETFs typically track an index of publicly traded real estate investment trusts, or REITs, which are companies that own, operate or finance income-generating real estate. Investors that buy [real estate or REIT ETFs](https://seekingalpha.com/article/4499268-reit-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are often seeking high-yielding investments. ### 6\. Specialty ETFs One of the advantages of ETFs is specialization in [sectors](https://seekingalpha.com/etfs-and-funds/etf-tables/sectors#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) and other niche areas of the market. For example, [specialty ETFs](https://seekingalpha.com/article/4476225-what-is-sector-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) may invest in a sector of the economy, such as technology, or a more narrow sub-sector of technology, such as [Semiconductor ETFs](https://seekingalpha.com/article/4486862-semiconductor-etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) or Artificial Intelligence ETFs. Other sectors include healthcare, industrials, consumer staples, consumer discretionary, financial services, and utilities. ## ETFs vs. Mutual Funds ETFs and mutual funds share some common features and benefits but there are also some noteworthy differences for investors to know. For example, [ETFs and mutual funds](https://seekingalpha.com/article/4456179-etf-vs-mutual-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are both baskets of securities packaged as a single fund but ETFs trade intra-day, whereas mutual funds settle at the close of the market. ### Similarities - **Diversification:** Both fund types invest in a basket of securities, which makes them less risky than individual stocks and bonds. - **Variety of choice:** ETFs and mutual funds both cover a wide variety of asset types and security types for investors to choose from. - **Professional management:** Although [ETFs and index mutual funds](https://seekingalpha.com/article/4458010-index-etf-vs-index-fund#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) are passively managed, both types of funds are overseen by a professional manager or management company. ### Differences - **Trading:** ETFs are priced and traded intra-day, like stocks, whereas mutual funds settle at the close of trading at the fund's net asset value, or NAV. - **Bid-Ask Spread:** Since ETFs trade like stocks, there can be a range, or spread, between the ask price and the bid price. This spread can add to the cost of trading. Mutual funds don't have a bid-ask spread. - **Initial Investment Amount:** ETFs can be purchased at the cost of one share. This is typically much lower than the minimum initial investment requirement of a mutual fund, which typically ranges between \$1,000 and \$3,000. > *Tip: ETFs are not guaranteed investments. Although ETFs are generally less volatile than individual stocks, investors can reduce risk further by investing in a variety of ETFs from diverse categories, such as different types of equity ETFs, fixed-income ETFs, and commodity ETFs.* ## How to Invest in ETFs One of the attractive qualities of [investing in ETFs](https://seekingalpha.com/article/4456918-invest-in-etf#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link) is that buying and selling shares is relatively easy. Because ETFs have been around for nearly 30 years, and they've risen dramatically in popularity since their inception, ETFs are standard products offered at most brokerage companies. The relative liquidity has given rise to a vibrant community of both ETF [traders and investors](https://seekingalpha.com/article/4434317-stock-trading-vs-investing#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). Here's how to buy an ETF: 1. **Choose a brokerage firm**, such as a discount online broker like Charles Schwab, TD Ameritrade, or E\*Trade, or a fund company like Vanguard or Fidelity, or an investment app like Robinhood. 2. **Choose an account type**, such as a joint or [individual brokerage account](https://seekingalpha.com/article/4457684-brokerage-account#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), or a retirement account, like an IRA. 3. **Open your account**, which can take a matter of minutes online. 4. **Add money to your settlement account**, or core account, which is typically a money market account that receives and holds cash while it awaits trading in your brokerage account. 5. **Choose your ETF**, which can be done with the aid of an [ETF screener](https://seekingalpha.com/screeners/etfs#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). 6. **Buy shares of the ETF,** which is identified with a ticker symbol, by placing "buy" trade, selecting the number of shares to purchase, and submitting the trade during regular [market hours](https://seekingalpha.com/article/4434733-stock-market-holidays-and-hours#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link), Monday through Friday, 9:30am EST to 4:00pm EST. This is largely the same as the [process for buys company stocks](https://seekingalpha.com/article/4432568-how-to-buy-stocks#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link). 1\.29K Followers **Analyst’s Disclosure:** I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. **Seeking Alpha's Disclosure:** Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. Recommended For You ![](https://seekingalpha.com/images/users_profile/021/001/961/big_pic.png?io=w36&t=8659aa2ef5) ![](https://seekingalpha.com/images/users_profile/062/666/168/big_pic.png?io=w36&t=48f4aac16b) ![](https://seekingalpha.com/images/users_profile/000/016/392/big_pic.png?io=w36&t=62dca12d65) ![](https://seekingalpha.com/images/users_profile/057/095/211/big_pic.png?io=w36&t=84c5d9f434) ![](https://seekingalpha.com/images/users_profile/050/113/560/big_pic.png?io=w36&t=ee41bb6dcf) ![](https://seekingalpha.com/images/users_profile/001/379/791/big_pic.png?io=w36&t=064d12e00e) ![](https://seekingalpha.com/images/users_profile/017/186/012/big_pic.png?io=w36&t=ef9e285ba2) ![](https://seekingalpha.com/images/users_profile/062/917/110/big_pic.png?io=w36&t=3a6c2b7123) ![](https://seekingalpha.com/images/users_profile/049/853/134/big_pic.png?io=w36&t=372b4e6921) ![](https://seekingalpha.com/images/users_profile/000/498/952/big_pic.png?io=w36&t=feb4c563dc) Learn More On ETF [![PCEF: Understanding The Structure And Suitability Of This CEF ETF article thumbnail](https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2220498288/image_2220498288.jpg?io=w107)](https://seekingalpha.com/article/4884111-pcef-understanding-the-structure-and-suitability-of-this-cef-etf) [![BTCI: Squeezing Yield With This 'Bitcoin-Adjacent' Income ETF article thumbnail](https://static.seekingalpha.com/cdn/s3/uploads/getty_images/911549620/image_911549620.jpg?io=w107)](https://seekingalpha.com/article/4883801-btci-squeezing-yield-with-this-bitcoin-adjacent-income-etf) [![FDL: Basics Of The First Trust Morningstar Dividend Leaders Index Fund article thumbnail](https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2176080312/image_2176080312.jpg?io=w107)](https://seekingalpha.com/article/4883798-fdl-basics-of-first-trust-morningstar-dividend-leaders-index-fund) [![BLCN: A Bet On Blockchain Technologies article thumbnail](https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2175580056/image_2175580056.jpg?io=w107)](https://seekingalpha.com/article/4883780-blcn-a-bet-on-blockchain-technologies) [![AGQ: Important Considerations For This Highly Leveraged Silver ETF article thumbnail](https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2203217155/image_2203217155.jpg?io=w107)](https://seekingalpha.com/article/4883723-agq-important-considerations-for-this-highly-leveraged-silver-etf)

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